A tiny country smaller than Dorset is about to win the global space race

Lift off for Luxembourg Archant

It is a tiny country, known for its opaque financial affairs and low tax rates but Luxembourg has become an unlikely contender in the space race

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When it comes to European countries it hardly enjoys the highest of profiles. But Luxembourg does at least have a reputation for historic buildings and a thriving financial sector. Less renowned is its unlikely sounding position at the head of the global space race. That might be about to change though.

In the coming days, the tiny country – a fraction smaller than Dorset – is set to take a big leap towards becoming the first European country to guarantee mineral ownership rights in space.

Legislation enjoying cross-party support is due to go before parliament later this month which, if passed as expected, will see the Grand Duchy join the US in being able to claim a legal framework allowing companies to exploit the so-called ‘off-planet economy’. This, the next big leap in space, will involve the extraction of precious substances from asteroids and other ‘near-Earth objects’.

It might all sound like science fiction, but the capabilities required for its realisation are now largely in place. Developments in artificial intelligence, avionics, robotics, 3-D printing and reusable space technologies all instil growing confidence that, one day soon, we will see machinery rocketed into space to intercept asteroids and extract precious minerals that are increasingly rare on earth. And Luxembourg has placed itself at the front of this revolutionary sector.

It might seem, at first glance, a strange development for the country, but in many ways it is a logical progression. In relation to its size and population, Luxembourg has one of the world’s most advanced economies (with the second highest per capita income, after Qatar), a position it secured in part as a result of its long history of steelmaking, and other manufacturing activity.

It was after the decline in these industries in the 1970s that saw the Grand Duchy develop its financial sector, helped by the headquartering there of the European Investment Bank. Now finance is by far the largest economic sector, accounting for a third of GDP. It is a sector that has undergone some criticism in recent years, as it come under greater scrutiny. This was seen, most notably in the “LuxLeaks” scandal, which saw 30,000 pages of documents, leaked by whistleblowers, expose favourable tax arrangements offered by Luxembourg to some of the world’s biggest companies – including Apple, Ikea, and Pepsi.

Amid the PR and legal fallout, the country has been keen to prove that it is far more than a tax-favourable corporate letter box or a lucrative place to work. The recent emergence of the space sector – which covers both financial (and legal), as well as technical aspects, combining Luxembourg’s two strengths – should be seen against that backdrop.

In fact, the country’s space industry itself stretches back many years, to 1985 and the creation of the Société Européenne des Satellites, a satellite telecommunications company that developed the Astra direct-to-home television service. This satellite expertise was enhanced by the country’s accession to the European Space Agency in 2005.

It is only recently, though, that the sector has taken off. Deputy Prime Minister Étienne Schneider refers to the “continuous efforts to diversify and grow the economy,” and he can report progress: “perhaps the most important aspect of this [space] initiative is the excitement it is generating across the world.”

The global space industry is undergoing its own evolution. To date, space travel has been limited to sending humans and materials into space before returning them to earth. Chris Lewicki is the CEO of Planetary Resources, one US company that has chosen to locate its European operations in Luxembourg. He points out that, while it takes tremendous energy to get above the earth’s gravity well, travel is “near-effortless” once beyond it, “so if fuel can be sourced from water in space, for space, then vast new horizons open up.”

Planetary Resources has developed 3-D printing techniques that have already converted asteroid material (dug up on earth) into complicated manufactured structures, foreshadowing self-sustaining activities in space.

Another US company that has chosen to locate its European operations in Luxembourg is Deep Space Industries, which is developing a test spacecraft, Prospector X. In time, it is hoped that the manufacture of this spacecraft will occur in Luxembourg, in a large, out-of-town facility.

Luxembourg has experience in developing such large-scale, state-of-art production facilities, notably in its publicly-supported film sector. The cavernous ‘Filmland’ facility, located 12km outside Luxembourg city, houses 4,000 square metres of film production space.

Ownership of private space companies is typically closely held, with investment limited to well-connected angel investors – mimicking the early-stage funding model that has proved so successful in Silicon Valley. Money is usually only sought from other investors when they bring clear strategic benefits, or from state actors – or both, in Luxembourg’s case. Through its Société Nationale de Crédit et d’Investissement fund, it is taking a stake in Planetary Resources and a seat on its board.

The country’s space sector now numbers two dozen companies plus various public bodies, including the University of Luxembourg and the Luxembourg Space Cluster. The latter body facilitates cooperation between public and private actors. “Being a small country, we need to be creative and open-minded,” remarks Yves Elsen, chairman of the Luxembourg Space Cluster. “The space sector here is a unique ecosystem.”

It’s not all plain sailing, though. The legislation about to go before parliament must work with the internationally-agreed, 1967 Outer Space Treaty, which decrees that nations cannot claim sovereignty over outer space, “including the Moon and other celestial bodies”.

While the US navigated around this to provide for the legal ownership of asteroid resources in its 2015 Commercial Space Launch Competitiveness Act, it is unclear how other big countries such as China will react in practice once resource appropriation begins – and whether this might turn into a source of international friction.

Elsen stresses the need to work openly across borders. “Anyone with a good idea and a good project can come to Luxembourg and start in the search for space resources,” he says. There are fewer regulatory restrictions than in the US when it comes to employing foreign nationals in the industry.

The latest space company to site its European operations in Luxembourg is Asian-based. Tokyo-headquartered ispace is a ‘lunar robotic exploration’ company seeking to discover, map and exploit space resources; to this end, it views the Moon as a strategic stepping stone. It is believed that the Moon holds billions of tons of frozen water at its poles, which could be broken down into hydrogen and oxygen in order to provide fuel. The establishment of fuel stations there could jump start a space transportation system.

Of course, all of this requires capital. Could Luxembourg also use its financial know-how to open up the sector to a wider range of investors? “We cannot preclude this,” says Elsen. “Thanks to the legislation going before parliament, we are establishing regulatory systems for obtaining these space resources. We already have a regulatory framework for investing in high risk companies.”

Perhaps the greatest challenge is that scant ‘proof of concept’ exists for space resource exploitation, so far. The European Space Agency’s Philae robotic lander touched down on a comet in 2014, but no mineral extraction or processing took place. Like the internet and other innovative sectors before, this one will surely take decades to mature. Indeed, nearly half-a-century has already elapsed since mankind first walked on the Moon.

But as breakthroughs occur, Luxembourg is resolved to be there, and not because of financial arrangements or tax considerations – rather, due to its space expertise and productive capacity. “We make the vision of sustainable economic development in the space industry a reality by supporting advanced research activities and technological capabilities in Luxembourg,” says Deputy Prime Minister Étienne Schneider. It is an approach that other countries may soon come to envy.

Daniel Pembrey is the author of The Candidate: A Luxembourg Thriller. Follow him on Twitter @DPemb