How early investors in the space race can reap rocket-fuelled rewards

Private investors committed $8.9bn to space infrastructure companies in 2020

Aside from being eccentric, high-profile billionaires Elon Musk, Jeff Bezos and Richard Branson all have one thing in common: they have invested heavily in the space technology industry, positioning themselves at the forefront of a new frontier in privately funded space exploration.

However, investment in high-tech space exploration is not simply about sending high-net-worth individuals into Earth’s orbit or even astronauts to Mars.

When we talk about the space economy, this refers to a broad range of products and services – from aerospace design, such as the development of reusable rockets, to the production of high-tech materials and systems.

It can also include manufacturing satellites for navigation or telecoms services, research and development programmes and scientific experimentation or even soft services such as sanitisation and catering, which present their own unique challenges in the zero-gravity environment of space.

Private investment in space infrastructure companies continues to increase, with $8.9 billion invested in 2020, while Nasa's budget was $22bn last year, rising 22 per cent since the beginning of the decade.

Despite this, the commercial space industry is very much in its infancy, with most technology still in its R&D phase. It means that this investment is considered long term and high risk.

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The [space] industry continues to be closely tied to government budgets and their priorities can often change
Chaddy Kirbaj

However, competition between the US and China in the fields of 5G infrastructure, robotics, artificial intelligence and space technology will create many opportunities for growth, supported by increasing investment from the private sector.

It is not only Mr Musk’s SpaceX that will dominate the industry – other big players such as Mr Bezos’ Blue Origin are muscling in on the game, too.

We do not expect major gains in the short term for this industry but over the long term, there could be some impressive rewards.

Globally, the space economy is estimated to be worth $2.7 trillion in 30 years while the size of the commercial space industry is expected to triple by 2040, according to Bank of America.

In the UAE alone, private investment in the Emirates’ space projects has exceeded Dh22bn over the past few years. The UAE space industry created more than 1,500 job opportunities while the number of space-related businesses in the country reached 57 in 2019.

The UAE government is heavily committed to the space industry, with its National Space Strategy 2030 looking to establish the country as a global leader in the sector as evidenced by recent projects such as the Hope Probe mission to Mars and Khalifa Sat, the Earth observation satellite.

Looking to establish its own foothold in the industry, Saudi Arabia plans to give its own space programme a $2bn boost by 2030 as it aims to diversify its economy and revenue. The kingdom already has a 37 per cent stake in the Arab Satellite Communication Organisation, better known as Arabsat, which was established in 1976.

According to the Saudi Space Commission, the current return on space-related investment is 1.81 Saudi riyal ($0.48) for every one riyal.

Despite this, investing in space is a risky business as the bullish trends could change and high-cost projects may be halted due to unexpected expenses or lower-than-expected revenue. The industry continues to be closely tied to government budgets and their priorities can often change.

At the same time, digital technology and innovation are enabling reduced costs, faster production and increasing diversification. Digital transformation is accelerating at a rate far higher than anyone expected.

The way the global economy has transformed so far proves that early investors in advanced technology are often those who reap the biggest rewards further down the line.

Chaddy Kirbaj is vice director at Swissquote Bank Dubai representative office

Updated: October 25th 2021, 4:00 AM
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