Thursday 28 Mar 2024
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This article first appeared in Forum, The Edge Malaysia Weekly on April 18, 2022 - April 24, 2022

“To infinity and beyond!” — Buzz Lightyear of Disney’s Toy Story

 

What a journey the past two years have been. Malaysia, the once roaring Asian Tiger, has seemingly lost her bite. The impact of the pandemic and political uncertainties pushed our economy into negative territory in 2020, recording a 5.6% contraction. Crestfallen pundits were certain that there would be further contractions in the years to come. We began to lose faith in our now-famous “Malaysia Boleh” spirit, and we slunk to wallow in self-pity, blaming all and sundry for our predicament.

To our relief, however, our GDP growth rebounded to 3.1% in 2021. No mean feat that, as we battled the Delta and Omicron variants of Covid-19 and their long tails. That economic fillip gave us hope, not much, but just enough of a ray. We need more than that if we are to continue to compete successfully for elusive foreign direct investment (FDIs) flows regionally.

In reality, we need a new economic engine to complement the ones we have now. We need what professors Chan Kim and Renée Mauborgne call a “Blue Ocean Strategy”. Of course, this approach was all the rage when Malaysia’s sixth prime minister made it one of his pillars for economic regeneration. Along with him, however, this model lost favour with the policymakers when his premiership ended in somewhat murky circumstances in 2018.

For the uninitiated, the Blue Ocean Strategy refers to a market for a product where there is little or no competition. This strategy revolves around searching for a business in which very few firms operate and where there is no pricing pressure.

What about the new space economy? Can it be the Blue Ocean we are looking for?

We have been hearing so much in the news lately about the New Space Economy, especially with eye-catching headlines that include celebrities taking day trips to space. But it is not confined to just space tourism for the uber-rich!

Although there are probably many ways to describe the current state of the space industry, comparing it to what it used to be might be most helpful. The original space economy was dominated by governments such as the US and the USSR with big budgets to fund expensive research. It was centralised, national and very bureaucratic.

The New Space Economy is global, entrepreneurial and accessible. It is increasingly diversified and expanding, with private players across a variety of sub-sectors. The landscape has now changed, with 75% of the industry’s expenditure coming from private companies. For a long time, companies in this industry were selling the satellite or the technology, and common people understandably could not connect this to their need. So, some providers began talking not about the satellites; they started talking about the data. Still, the customer could not intuitively understand that either. Now, more and more providers in the industry are realising that it is not about the data either; rather, it is about meeting customers where they are and offering answers.

This trend has seen participants from new ventures, new emerging countries and non-governmental investments that have propelled industry growth with a compound annual growth rate of 5.6% between 2018 and 2021. This global space economy was valued around US$447 billion in 2020, 55% higher than a decade ago, according to The Space Report 2021, Quarter 2. This is truly astronomical growth and made possible because the new space economy is finally connecting to the larger economy.

This improved customer-centric mentality has caught the attention of investors and the industry has become more investable. Investors are finally hooking investment terms such as “real organic growth”, “economies of scale” and “paths to profitability” to the space economy.

The increased capital means more players are bringing more technologies to the marketplace. All of this translates into lower costs, reduced barriers to entry, shortened timelines for launches, and more customer-centric offerings.

Companies are now launching and retrieving spacecraft and shuttles, providing ground and mission control, doing Earth observations and conducting space science. The list runs longer when we include spaceport operations.

Spaceport, you say? In Malaysia no less? Can this be the Holy Grail that can bring back the hunger and sharpen the fangs of this fallen Asian Tiger?

Humour me this: The opportunity to leverage the new global space economy — from various sectors such as satellite services, satellite manufacturing, launch industry, ground equipment and associated non-satellite industry — is within our grasp. Local universities such as Universiti Tun Hussein Onn Malaysia, Universiti Kuala Lumpur, Universiti Kebangsaan Malaysia and University Sains Malaysia, to name a few, have earth and space-related institutes to provide local content, and they are not alone.

The 2019 LIMA exhibition in Langkawi witnessed a group of local and international space players show support for a government-backed space industry initiative, if it is strategically conceived. They include prominent Chinese players, the European Space Agency, the Italian Space Agency and their vendors.

Situated on the equator, Malaysia provides the perfect launch pad for horizontal air-dropped satellite launch services that are a fraction of the cost of the traditional vertical rocket variety. And an island such as Langkawi would probably be as good a site as any for a fully functional spaceport, an iconic site for launching and receiving sub-orbital commercial and experimental spacecraft. For proof of concept, Puerto Rico, more than 17,000km away, has a fully functional, successful spaceport on the equator. As Langkawi and Puerto Rico are equidistant around the Earth’s circumference, sub-orbital flights from Puerto Rico can land safely in Langkawi and vice versa.

Naysayers will point to the spaceport in New Mexico, the US, and say that even a collaboration between an American state and Branson’s Virgin Galactic failed to fly as anticipated. My rejoinder: The New Mexican spaceport was meant only for space tourism, where people pay US$250,000 (RM1.1 million) to USS500,000 to watch our planet from 25,000km above, suspended in zero gravity for a couple of minutes. Space tourism is but a small service in the new space economy.

The Malaysian model can offer more than that: from ground service and mission control centre services, sub-orbital flights for scientific studies, Earth observation, air-dropped launch services and space sciences. For good measure, we can even have a Cosmotarium, where we can build an educational museum and simulate space travel for the land-locked. The key to success and profitability of this venture will also rest on the satellite telephony and data collection and dissemination services that underpin these services.

Of course, many feasibility studies still need to be done to assess this new business model. In a Red Ocean Strategy, an organisation has to choose between creating more value for customers and a lower price. In contrast, those who pursue a Blue Ocean Strategy attempt to achieve both: differentiation and a low cost, opening up a new market space. Leading the Asean and Organisation of Islamic Cooperation countries in a new industry where competition is almost non-existent should put a bounce in our steps and a swagger in our walk moving forward.

The New Space Economy — a promising frontier for Malaysia to pioneer in this region. Are our leaders up to the task of leading us there?


Zakie Shariff is executive chairman of Kiarafics Sdn Bhd, a strategy consulting group. He is also an adjunct professor at the Faculty of Industrial Management, Universiti Malaysia Pahang.

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