The global space economy is projected to nearly triple in size over the next decade, reaching $1.8tn by 2035. While space was once the exclusive domain of global superpowers, sharp declines in launch costs are allowing many new nations and companies to break in. Special economic zones (SEZs) can play a big role in opening the skies even further as regulatory sandboxes for space.

A few space-focused SEZs are already emerging — Poland’s Silesian Space Valley in the Legnica SEZ, the UAE’s Masdar City Space Economic Zone, and Oman’s Zone 88 in the Duqm SEZ to name a few. It’s still unclear how effective these zones will be. Much will depend on whether they, like all truly successful SEZs, can reform institutional barriers to growth. A regulatory sandbox can help do that.

These are programmes in which agencies can test new ways of regulating innovative industries in a controlled environment. But what would a regulatory sandbox in a space-focused SEZ look like? 

First, it could introduce new streamlined approval procedures. Space companies the world over endure lengthy and complex bureaucratic systems resulting in enormous costs and delays. An SEZ could adopt more efficient systems, as New Zealand and Luxembourg have, without compromising the environment, public safety or national security. Cutting delays would add so much value to the industry that even nations without significant space programmes could quickly set themselves apart. 

Secondly, regulators could offer more dedicated and responsive assistance to companies in the SEZ. For instance, agencies could assign personnel and resources to provide advice, feedback, and assistance to companies and make decisions in days or weeks instead of months or years. Regulatory sandboxes also help foster collaboration, mutual understanding and communication, which improve both the agency’s capabilities and the industry’s compliance and respect.

It is true that some countries have more pressing uses for SEZs than space. However, they should not overlook the long-term benefits that can result from fostering this high-paying, knowledge-based sector for young talent.  

Moreover, a regulatory sandbox approach is far more cost-effective than the standard approach to attracting industries to SEZs — heavy reliance on tax incentives and expensive physical infrastructure. A space-focused SEZ that trades some incentives and infrastructure for regulatory efficiency will get a lot more bang for the buck.

So, let’s pause before building another zone that competes with thousands of others globally for the same old industries. An SEZ that pilots regulatory innovation for the space industry may be the key that helps nations ‘slip the surly bonds of Earth’ and reach for the stars.

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This article first appeared in the December 2024/January 2025 print edition of fDi Intelligence