Gateway to Space
An international space freeport is the goal of a promising partnership between entrepreneurs and the Third World.
Opportunities for commercial ventures in the reaches beyond the atmosphere are growing more real with each passing day. Many experts in the field of space industrialization expect a virtual explosion of profitable business activities in the space near the earth over the next few decades.
Already, the communication satellite business approaches $2 billion in total market size. During the next decade it is anticipated that the market for space services such as earth-resource surveying by satellite, manufacturing in microgravity, and additional communications business may grow to several times that amount. In the following years, projects with multibillion dollar returns may be possible—for example, mining asteroids for useful materials or fabricating solar power stations in orbit to supply energy to earth.
As with any large-scale initiative, problems stand in the way of realization of these benefits, although for the most part they are not technological. They concern, instead, cost barriers to taking advantage of these prospects in space and political uncertainties over commercial enterprises in the space environment. Already space has become an arena for national rivalries, with the introduction of killer satellites. If the commercial applications of space are to be fully realized, a means must be found to ensure economical, nongovernmental, and international access to orbit.
A unique opportunity is at hand to widen such access and to promote peaceful commercial development of the frontier. The key to the concept—now attracting wide support among developing nations—is a 200-square-mile space-oriented industrial park on earth. Known as a World Space Freeport, it would have powerful incentives to promote growth: complete exemption from taxes, tariffs, and barriers to commerce.
An unusual coalition of participants has formed to advance the Space Freeport, which would be established in a developing country. Among the supporters are such individuals as Robert Heinlein and Buckminster Fuller and a number of past and present aerospace executives and NASA officials. Representatives of 18 nations now have advisory roles in the development of programs to be funded by the freeport. The idea has attracted support from representatives of developing countries at the United Nations in the past few months, where it was praised last October for its potential "for generating finance to provide the impetus for the research, training, and other activities aimed at bringing the benefits of outer space to all nations." Liberia and several other countries have gone so far as to state their readiness to designate 200 square miles as a tax- and tariff-free area encouraging space development.
FREE-TRADE POSSIBILITIES Before examining the space-related promise of a new freeport, it is worth exploring the economic aspects that have contributed to international interest in the proposal to date. Two years ago, a small group of space-oriented individuals of a largely free-market persuasion began to discuss ways to promote the commercial development of space so as to benefit both industry and the developing nations. They believed that future conflicts between the "have" and "have-not" nations could pose risks for commercial space development, much as has occurred with private attempts to begin mining the ocean bottom (see "The Seabed Power Struggle," REASON, July 1974). Under the aegis of a nonprofit research group in Santa Barbara, California—the Sabre Foundation—members of the project became impressed by the potential for freeports to become a nexus of a new relationship in developing the frontier. Their research showed that developing nations could generate significant revenues from freeports to fund new space initiatives.
Among the originators of the Space Freeport project was Prof. Alvin Rabushka, a specialist in free-trade zones at the Hoover Institution at Stanford University. Drawing upon first-hand knowledge of free-trade zones around the world, he identified factors that appear to make some areas more successful than others. Labor markets and proximity to trade routes exert some influence, Rabushka concluded, but political factors are often decisive for the prospering of free zones.
By definition, all freeports and free-trade zones offer to commercial enterprises some relief from taxes or tariffs. Yet the extent of relief is generally limited in time to between 5 and 20 years. In many cases, moreover, the exemptions are considerably limited according to the type of business in question, and red tape frequently encumbers operations. To make the proposed Space Freeport as prosperous as possible, researchers for the project proposed the following conditions for the site:
• No duties, commodity or sales taxes.
• No exchange controls; free banking activities in all currencies.
• No personal income or corporation taxes (conventional depreciation write-downs are irrelevant).
• All profits may be 100 percent repatriated.
• All infrastructure charges, utilities, and import costs at world market prices.
• Land leases freely transferable at market prices.
Other means of ensuring the attractiveness of the freeport to commercial tenants—both space- and nonspace-related—were also explored. The founder of the project, a 27-year-old Harvard graduate named Mark Frazier, who specializes in free-trade zones and municipal service delivery, determined that the exemptions from taxes and tariffs should last for 99 years, rather than a period of one-tenth that duration, as is standard in existing zones. The only regulations at the freeport would pertain to sanitation and health standards, import of military weaponry, and traffic in other nonpeaceful commodities. These minimal restrictions would be administered by a nongovernmental organization formed specifically for the purpose.
POTENTIAL PROSPERITY The proposed package has proven attractive to potential host countries. With the assurance of continuing sovereignty and title to the land at a Space Freeport, a dozen governments have responded positively. Part of the response seems attributable to knowledge of several flourishing—though significantly restricted, free-trade zones now operating in developing nations. At the free zone in Colon, Panama, more than $1.3 billion in commerce is transacted annually at a 100-acre site. Direct employment generated by the zone is estimated now at 7,000 jobs annually in the country. The freeports of Singapore and Hong Kong have also demonstrated the merits of the approach. In three zones amounting to a single square mile in Taiwan, adoption of free-trade policies has led to the generation of an annual trade surplus at the zones greater than that of the rest of the country. And a free zone in Masan, Korea, has been responsible for the creation of more than 50,000 jobs since its inception in 1971.
A Space Freeport has the potential to overtake even the most dynamic of these zones. Its incentives to business investment would be unequaled, while the size of the zone—14 miles square—would put it in the same class of physical dimensions as Hong Kong and Singapore. Conservative assumptions suggest that the freeport would create substantial revenues from its first year of operation. Assuming that one-fortieth of the zone were to be leased in the initial year, at a rate no higher than that charged by free zones in other developing countries (about $130 per month for one-quarter acre), rentals alone would net more than $12 million. Foreign exchange earnings would be much higher. If the tenants at the zone enjoyed even one-thirtieth of Taiwan's export sales per acre, more than $90 million in foreign exchange would be earned in the initial year.
Rental income from the freeport would be used by the administering agency in lieu of taxes. Once half of the zone had been leased, these revenues would approach $400 million per year. The Space Freeport project has proposed that a third of this income be paid to the host government in royalties, while another third be used to defray costs of infrastructure development and service delivery. The remaining third—ultimately $130 million a year—would go to help lay the foundation for a new era of commercial development for space.
THIRD WORLD STAKES The romance of space has ebbed and flowed in America in recent years, but it has never really lost popularity in the Third World. Thus, when project members proposed the Space Freeport to possible host countries, it found a number of nations willing to investigate the creation of a freeport where politics might normally have inclined them otherwise. In a very visible way, a freeport devoted to international space activities could assist the host country in jumping to the frontlines of development.
Although overshadowed by the budgets of NASA, $130 million a year would have significant consequences for Third World space efforts. With modern technologies, nations can now develop communications systems without having to connect telephone users with expensive and obsolescent copper wires across the country. Satellite sensing of mineral deposits can open up valuable commercial opportunities in developing nations. With judicious use of freeport income, these and other benefits of space technology to the Third World could be greatly enhanced. As additional freeports for space are established in the future, the total amount available for such purposes would multiply.
Programs in the transfer of technology to developing nations would be overseen by a nonprofit, freeport-financed organization called the World Space Center. Presently incorporating in Austria, to ensure a neutral base, the center is today composed of representatives of 18 nations. Its decisionmaking council consists of space scientists and officials from countries ranging from Afghanistan to Venezuela. Upon establishment of the first Space Freeport, the council will convene to approve spending priorities for the initial year.
In recent months, the contours of future World Space Center activities have begun to emerge. A waiting list of more than a year for developing-nations' personnel to receive training from the US government in interpretation of satellite imagery has prompted organizers of the center to arrange with the University of California at Santa Barbara for creation of similar courses. The proposed Remote Sensing Institute, to be funded by freeport income, would accommodate up to 200 trainees a year. Upon completion of the courses, graduates would be assisted in efforts to establish freeports in their home countries.
Another portion of the income will be invested on behalf of participating nations in promising commercial space enterprises. With a multitude of high-risk/high-payoff ventures likely to appear in the next 20 years, it is conceivable that the center could reap handsome returns for its efforts. Revenues from the investment could be used to support research into peaceful applications of space, development of Third World-oriented satellite systems, and further training programs. Developing nations would thus acquire a stake in the private development of space.
The World Space Center organizers expect a considerable portion of the budget to be spent on lowering the cost barriers for developing countries seeking to orbit satellites. At present, even with the advent of new US and European launch systems in the coming decade, it seems likely that the price of buying satellites will remain beyond the reach of many nations. A "Users Fund" could offer assistance to such countries on a matching-grant basis.
PEACEFUL SATELLITES Organizers of the Space Freeport proposal ultimately see a further benefit from their project. By the late 1980s, they believe, demand for satellite launches will have grown enough to justify creation of an international space launching site, to be located near the equator. In contrast to launching ranges at higher latitudes, an equatorial site offers the following intrinsic advantages:
• Additional momentum for launch vehicles. At the equator, the spin of the earth amounts to almost 1,000 miles an hour in an easterly direction. Satellite launches into equatorial orbit from low latitudes thus are more efficient than from other locations, where the boosters have less momentum.
• Simplified orbital paths. To enter an equatorial orbital plane, most satellites now launched must make wasteful "dogleg" maneuvers. An equatorial launch site can render doglegging unnecessary and simplify tracking procedures. A launch area near the equator, moreover, permits insertion of a satellite into any orbital plane with relative ease.
• More frequent "windows." Because satellites launched from the equator can pass overhead on each circuit, launch opportunities open up with each orbit for a minimum energy/fuel rendezvous. If a space vehicle in equatorial orbit is to return to earth, landing procedures are simplified by the recovery site's position in the orbital plane.
These benefits have already been instrumental in persuading two existing launch organizations to establish equatorial sites. The European Space Agency will begin offering launch services by 1980 from a base in French Guiana, South America. A controversial private West German organization, OTRAG, has spent approximately $30 million to develop an exclusive launch zone in Zaire (see Reason, July 1978). In addition to these sites, equatorial ranges for suborbital "sounding" rockets—used for atmospheric tests—exist in Kenya and India.
Unlike other satellite-launching areas, an earthport would be the first launch center to serve the entire planet. Its international nature would help to lower cost barriers for both launch providers and their customers. Rather than having to build separate launch facilities of their own, organizations wishing to conduct equatorial launches could benefit from the savings of shared infrastructure and support services. As a freeport, it would provide a depoliticized atmosphere conducive to peaceful operations by governmental and private launch organizations alike.
In the long run, such a launch site would conceivably pay major dividends in preserving world peace. Within the next two decades, under almost any scenario, many new nations will acquire the means to start their own rocket programs. The spread of launch capability may result in further deployment of ballistic missile systems within national boundaries. If countries have the option of conducting peaceful operations at an international site, the proliferation of these future weapons delivery systems could be reduced. Earthport would offer incentives for nations to undertake peaceful space efforts at a central location, by offering considerable cost savings over attempts to go it alone. The neutrality of the site would also lessen political reasons for conducting rocket programs within national boundaries.
Because any future launch zone must enjoy strong international support, the decision about where and when to create Earthport will be left to members of the World Space Center. Careful international studies will precede any such move. If optimistic estimates of space industrialization are correct, however, there could be as many as three international launch sites—one in Africa, one in the Pacific, and one in South America—by the end of the century, each serving nearby industrial countries.
BRIGHT FUTURE The next few months will determine the prospects for the Space Freeport. Operated until recently by volunteers, with financial support from such sources as Arthur C. Clarke and Barbara Marx Hubbard, the project is moving rapidly into a new stage. Legal expertise in the establishment of necessary enabling legislation is being offered by a leading New York law firm. At the suggestion of the Liberian government, preparations are under way for a visit to review potential sites for a freeport in Liberia. Research trips to other countries expressing interest in the project, including Sudan, Indonesia, Venezuela, and Kenya are also anticipated.
In the near future, also, a new nonprofit Free Zone Authority is expected to be incorporated to provide administrative services at the site chosen for the Space Freeport. The authority will oversee the development of infrastructure and the contractual delivery of services at the freeport, as well as establish arbitration mechanisms for disputes among tenants. Its first task will be to procure letters of intent from potential lease tenants at the zone, who will be offered rights to rent one-quarter acre or more of tax- and tariff-exempt land at an annual rate of $1.44 per square meter. Provided sufficient interest is found among prospective tenants, the Free Zone Authority will borrow from lending institutions a significant portion of its anticipated lease income for the first year to begin operations.
Organizers do not seem daunted by the size of the task before them. The Free Zone Authority has already been fortunate in attracting the participation of individuals with diverse talents and backgrounds: municipal services specialist Robert W. Poole, Jr., Harvard astrophysicist Larry Smarr, rocket pioneer Krafft Ehricke, international businessman and Common Market advisor Michael van Notten, and a number of others. Under the supervision of Stanford freeport expert Alvin Rabushka, a detailed development plan for the freeport is now in progress. "It really is a way for individuals to affect the direction in which space develops," notes project director Frazier. "And it's a chance to see a zone of unprecedented economic opportunity set up on earth." Given the progress of the Space Freeport concept to date, it is possible that an important threshold for civilization may soon be crossed.
Gary Hudson is a consultant to NASA and the head of a nonprofit aerospace research organization, The Foundation (85 E. Geranium Ave., St. Paul, Minn. 55117).
Philip K. Chapman, a former scientist-astronaut, is engaged in studies of future solar satellites for the consulting firm of Arthur D. Little. He is president pro tem of the World Space Center. Portions of this article have appeared in the Commercial Space Report, a monthly newsletter published by The Foundation.
Profits on High As we enter the third decade of the space program, the emphasis is shifting from the exploration of space to the exploitation of potential space resources. Among those resources are microgravity, materials more abundant than are found on earth, undiminished solar energy, and most important in the short run, the unobstructed "view from a height."
Two space services afforded by this all-encompassing view from orbit above the earth bear special examination. First, satellites placed in geosynchronous earth orbit can image a full one-third of the planet without changing position. Used by nearly all communication satellites presently operating, this so-called 24-hour equatorial orbit is a key to many space services. Present comsats are relatively small in both size and capacity, generally weighing under 5,000 pounds and capable of carrying a few thousand telephone or a few dozen TV signals. This style of comsat will continue to be operated for the next decade.
While most communication satellites are quite small at this stage, the prospect is for them to grow by tens and even hundreds of times in size, power, and weight. Higher power transmitters coupled to large antennas and sensitive receivers will permit the use of very small companion units by ground-based users. This "complexity inversion" process (complex, heavy satellites; simple, cheap terminals) will allow direct broadcast of information and programming into the home or the office of the future. The number of TV channels, for example, may be increased to several tens of thousands, receivable the world over. Telecommunications will be changed dramatically by the use of small, calculator-sized pocket phones that will eliminate the need to be restricted to a single location, such as an office, to receive calls. Data communications will become much easier and cheaper, leading to electronic mail communication and widespread use of computers in all aspects of business life. Information banks will funnel their information through the large comsat platforms of the future, giving us access to vast amounts of data on which to base our plans.
The remote sensing of earth resources is also a profitable business opportunity in the near future. With an operational form of satellite similar to the NASA Landsat series, companies and countries will be able to locate promising new resources of gas, oil, and minerals. Additionally, remote sensing is useful in checking the spread of crop infestations and disease. All of this information is of prime economic value, both for the direct user of the service and also for the investor or commodity trader. Space sensing of earth may help prevent unruly markets for certain goods or warn interested parties well in advance of a commodity crisis.
A further market will develop in the education and training of experts in the fields of communications and earth sensing. While the World Space Center has plans to offer courses in at least one of these fields, it is probable that the market is large enough to warrant both major consulting and training activities of a commercial nature.
Later in the decade of the '80s, other opportunities for the near-term use of space will mature. Foremost among these will be the possibility of manufacturing in microgravity. Several hundred US and foreign firms have already contacted NASA (which is sponsoring early studies of materials processing in space [MPS] and planning flight experiments aboard the Space Shuttle), and over 200 have purchased space on future Shuttle flights to test their own MPS ideas.
Space processing may mean the development of exotic new materials that cannot be manufactured in the gravitational field of earth for any of several reasons. Among the products envisioned by NASA and industry experts are new or improved biologicals and pharmaceuticals, unusual electronic devices with potentially large markets, and ultrahigh-strength materials. One enticing possibility is the manufacture of room-temperature superconductors, which would completely revolutionize the power storage, generation, and transmission industry.
Once large boosters are developed, and commercial space transport really begins, many new and highly profitable business ventures in space will be possible. Two of great interest and import are powersats and extraterrestrial mining.
Powersats, or satellite power stations, would be large platforms (many kilometers on a side) assembled in equatorial geosynchronous orbit. Able to convert sunlight into electrical energy, which would be beamed to earth users in the form of microwaves or laser light, such power plants may be competitive with earth-based forms of electricity generation. At the same time, they will be nonpolluting and more efficient than ground-based solar installations. Ultimately, hundreds of powersats might be placed into orbit, each with a worth of as much as $10 billion, according to NASA estimates.
Mining the moon and the asteroids might seem improbable on first consideration, but NASA and industry studies indicate that such is far from being the case. While first studies concentrated on the moon following the successful Apollo missions to the lunar surface, later reports suggest that certain asteroids, notably the nickel-iron class, may be the first target for extraterrestrial prospectors. By the 1990s, it should be possible to mine a nickel-iron asteroid and profitably return loads of cobalt, platinum, rhenium, vanadium, osmium, iridium, and gold to earth.
As an illustration, the total economic value of a single 100-yard diameter nickel-iron asteroid is over $4 billion (.25 billion iron, 1.5 billion nickel, .5 billion platinum, 1.6 billion cobalt, more than 1 billion trace elements). Some astronomers calculate that more than 100,000 bodies this size or larger exist in the solar system, yet the energy requirement to reach them is no greater than that needed to travel half-way around the earth, once the transportation system has been developed.
Investment opportunities can thus be expected to abound in the coming decades of space. By setting aside a portion of the freeport lease income for investment in promising commercial enterprises, the World Space Center can ensure that the developing nations will profit from windfalls enjoyed by space-oriented businesses. lncome earned by this investment fund will be used to support further space ventures by developing nations. In this way, the Third World will have a stake in the commercial development of space.
—Gary Hudson