NATIONAL STRATEGY FOR THE SPACE SECTOR: PROPOSALS MADE BY PROESPAÇO The Portuguese Association of Space Industries MARCH 19, 2012

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1 NATIONAL STRATEGY FOR THE SPACE SECTOR: PROPOSALS MADE BY PROESPAÇO The Portuguese Association of Space Industries MARCH 19, 2012 VISION FOR THE NEXT 10 YEARS António Neto da Silva * Portugal s space industry is currently at an intermediate stage of development. The objectives for growth in its industrial base, technical skills and technological development set out in the Strategy for were achieved in every area and a 100% geographical return was accomplished in optional programmes. We recommend that Portugal consolidate the idea of how it wants to develop the space sector based on the following goals: 1. creating a modern industrial sector that is both profitable and engaged in international projects; 2. creating an international image of industrial and scientific excellence; 3. promoting innovation and integrating value chains related to navigation, telecommunications and earth observation, which would necessarily include the greater added value aspects of these sectors; 4. using the space industry as a tool for administrative modernisation, particularly in regard to territorial planning (continental and oceanographic), natural resources management, civil protection, and environmental and climate change monitoring; and 5. using space as a means of cooperating with other Portuguese-speaking countries. In this way, Portugal should reach a level of technological maturity in the next decade that will establish the country as an upstream supplier (see chart below) of small integrated systems and subsystems for space missions, including scientific instrumentation (for both the earth and space segments). The next 10 years will be characterised by an increased economic return from applications and services used in non-space markets that draw advantages from space technology and the wealth of data that will be made available by future missions (e.g. * Dr. António Neto da Silva, President of Proespaço, the Portuguese Association of Space Industries, Portugal. 3

2 GMES and Galileo). Portugal will benefit from global trends in the use of navigation technologies (GPS, GALILEO and others) and earth observation satellites (e.g. GMES) as sources of increased productivity in multiple sectors continue to nourish the development of new services and applications. Several companies in Portugal are developing innovative applications and products based on ground-breaking navigation technologies as well as on space-based information systems that will have a decisive multiplying effect on Portuguese investment in space. Illustrative Diagram: The space sector economy. Source: The Space Economy in the UK: An economic analysis of the sector and the role of policy. Over the next decade, Portugal should seek to evolve the spin-off factor (multiplying the return to the economy from direct investments in ESA) from the current level of two to levels closer to those of countries with slightly longer histories in the industry (e.g. Norway, Denmark, the UK and others) where the level is about four. More than merely financial, the economic return involved is almost entirely from exports, given that the Portuguese space industry is totally geared towards exports. In addition, the main inputs into the sector consist of Portuguese knowhow, with a low level of incorporation or importation of components or raw materials, resulting in a substantial contribution to Portugal s gross value added and trade balance. The space sector will help guarantee Portugal s internationalisation beyond Europe, a market where growth is likely to be limited. The ESA has been extending its cooperation with other space agencies such as NASA, Russia s ROSCOMOS and the Japanese agency JAXA. The first two Galileo satellites were launched by the Russian rocket Soyuz and Russian support has virtually 4

3 guaranteed the 2016 mission to Mars. New opportunities for the Portuguese space industry will be within reach if we remain involved in such programmes. The space sector is also expanding strongly in Brazil, where several programmes are underway to equip the country with an independent capacity to manufacture, launch and operate satellites. The Portuguese industry is well positioned to participate actively in the Brazilian Space Agency s programmes. Portuguese companies are currently engaged with several Brazilian intuitions, including the country s National Institute for Space Research (INPE) and Embraer, the Brazilian aircraft manufacturer, in space technology projects that are not linked to ESA. Other developing countries such as China, India, South Africa and Nigeria are developing large-scale, long-term space programmes. Some Portuguese companies already have contracts with companies and agencies in these countries and there is ample room for growth in this area. In a national climate where GDP growth is essential to ensure economic sustainability over the medium and long term, investing in an expanding sector such as the space industry will help increase productivity, a vital requirement to improve Portugal s debt ratings and other economic indicators. GOVERNANCE Background Historically, Portugal s participation in the space industry has been dealt with (supervised by) the Science and Technology Foundation (FCT) (Science Ministry), although, from the beginning, several stakeholders (the Environment and Economy Ministries) have contributed financial support. For historical reasons related to Portugal s ESA membership process, the institutional component related to science and technology has dominated the economic component in mandatory ESA programmes, while other ministries have made contributions to certain optional programmes. It is important to turn this approach around. In fact, given that the space industry is a productive, export-oriented sector and a hallmark, both domestically and internationally, of a developed economy, the Economy Ministry should play a more fundamental role. Given its strong industrial component and wealth-producing capacity, the space industry should be seen in Portugal, as it is in other countries, as part of the economic fabric of the country. On the other hand, it is important to draw attention to the fact that (more so than for the aeronautics and security sectors) the space industry market is essentially institutional. The existence of a space industry in a country is highly dependent on the will of the state. For this reason, state intervention is not only a necessary, but an indisputable and permanent requirement to guarantee the level of return expected from investments. Further more, from an economic point of view, the space sector turns its size disadvantage into a guarantee of future growth. Compared with much larger sectors, in- 5

4 creased public investment is difficult to justify from a relative point of view, any increase in investment in the Portuguese space industry would mean a significant leap forward for the sector in absolute terms. On the other hand, it is important to safeguard the important role played by the space sector in the National Innovation System, specifically the opportunities it provides for the National Scientific and Technological System (SCT), both directly (scientific programme) and in terms of cooperating with industry. As clearly shown in the Portuguese Space Catalogue (FCT, 2010), numerous SCT entities, in addition to the industrial sector, have developed important activities with ESA, not only benefitting from ESA investments, but also applying them directly in science and technology. The ESA internship programme, an excellent example of joint ADI management (Economy Ministry-FCT), has had a fundamental impact on the sector in Portugal. The 100 trainees ( ) have returned to Portugal and created new companies in the sector, strengthening the Portuguese space industry and space-related science. In some cases trainees have remained at the ESA in important positions (ADI, 2010). However, the importance of the space industry is not limited to economic and scientific development. The obvious connections with territorial planning and economic diplomacy as well as synergies with military areas should encourage the participation of other institutions, namely the ministries for the environment, foreign affairs and defence. Organisation The institutional management of Portugal s participation in the space sector, either through ESA or other organisations or committees where space is discussed (including EUMETSAT, European Community space, aeronautics and security bodies, GALILEO and GMES) should be coordinated by a structure with executive powers together with a consultative steering committee: The executive office (which could be called the Portuguese Space Office (Gabinete Português para o Espaço GPE) or a similar name) would be responsible for representing Portugal in all the relevant forums (ESA, EC, EUMETSAT etc.) as well as defining strategies and administering programmes and finance. The steering committee would coordinate the political guidance given by the different ministries, ensuring that every participant was given a voice (particularly those that finance the sector) in regard to the strategic options made by the executive body and the activities of its delegates. This coordinating structure could or could not be under the supervision of the Ministry for Education and Science. Given the eminently industrial nature of the space sector, supervision by the Economy Ministry would also be appropriate. 6

5 The coordinating body should be assured stability and made resistant to the impact of political change. The coordinating body should be operational and highly dynamic in relation to the need to operate different interfaces and to guarantee the quick responses that are often required. The institutional nature of the space market requires a careful approach in order to ensure that opportunities are not lost to other countries with experienced and determined lobbying machines. The coordinating body should be able to recruit human resources to ensure it has the capacity to respond to demand in regard to international representation and cooperation with Portuguese entities. FINANCE The financing of ESA s industrial activities (and of other institutions such as EUMETSAT) should be continued and expanded in order to: Guarantee investments already made in key technologies (technological development programmes). The risk of not maintaining these investments would represent an irrecoverable loss of fundamental assets and skills (unemployment) before the forecast return to the Portuguese economy could be secured; Support the subsequent development stages of the different key technologies in which Portugal is considered a leader; and Expand participation in current and future mission programmes in which Portugal could play a role as a supplier of subsystems. The commitment to be made by Portugal over the next decade should be initiated for the period at the November 2012 ESA Ministerial Council. This is of great importance to maintain Portuguese space industry s competitive advantages and to coincide with the post-fiscal consolidation period in Portugal when the state is expected to implement expansionary economic measures. To place the level of financing in context, the analysis set out in the National Space Strategy (FCT) remains valid. As is well described in that document, Portugal should asymptomatically move closer to the average level of financing by other member states as a percentage of GDP. If Portugal invested the same percentage of its GDP in space as the other ESA member states, it would invest 36 million/year, to which should be added national financing of 29 million/year, that is, it would invest an overall total of 65 million/year. As can be seen, current levels of investment are significantly below this objective. More seriously, Portugal s investment in the space sector suffered a 50% cut in Reversing this downward trend is thus absolutely vital. 7

6 Given current budgetary restraints, it would be prudent to make a sustained increase in investment levels, in particular taking advantage of the fact that the investment period should coincide with a period when Portugal s fiscal consolidation should lead to more expansionary economic policies, i.e to As a first step, ProEspaço proposes that at the 2012 ESA Ministerial Council (which relates to ) Portugal should return to its 2005 level of investment in the space sector, which the industry has already show it can absorb. That means subscribing to optional programmes in the amount of about 12 million/year (a total of 36 million for the three-year period ), which, together with obligatory contributions, would result in a total investment of about 24 million/year. From then to 2020, investment should steadily increase, provided it can be shown that the return will remain above 90% (commitment by industry) until it reaches the same level as investment by the other ESA member states as a percentage of GDP. By adopting this type of long-term commitment, Portugal could achieve highly favourable results from investments in the space sector by: Developing scientific and technological projects related to ESA contracts and technology research and development (TR&D) projects related to European Community framework programmes as well as the space-related programmes of other organisations; Including end-users from different sectors in European projects and services, adapting their methods and tools to European practices, thus improving their performance in the area of environmental, security and transport policy; Increasing business competitiveness, creating skilled jobs and promoting exports of Portuguese technological products; Extending activities developed for the specie sector into other areas such a transport, telecommunications, navigation and security, opening new markets for Portuguese institutions; Consolidating an international image based on credibility and development in keeping with the aims of the Lisbon Strategy and Portugal s Technology Plan; Cooperating with different national bodies in regard to sector and national policies, e.g. in the area of international cooperation; and Developing synergies with Portuguese space sector activities to strengthen key skills for competing internationally. National collateral support programmes could be immediately created by adding a call for space-related projects in Portugal s National Strategic Reference Programme (QREN) for European Unions funds. Adding a similar space sector call to the FCT s R&D section would also greatly benefit Portuguese industry. For example, Spain has created national programmes to support research, development and innovation (RD&I) in the space sector, managed by its National Institute for Aerospace Technology (INTA). 8