The source text is in Chinese. This English version is for reference only. In case of any discrepancy between this English version and the Chinese version, the Chinese version shall prevail.

The Government proposed streamlining of vetting procedures of licence applications for operating Low Earth Orbit (LEO) satellites in the latest Budget, and the relevant work to be completed within this year. It is believed that the measure will bring significant opportunities for Hong Kong's industrial transformation and development.

LEO satellite refers to artificial satellites orbiting at distances of approximately 500 to 2,000 kilometres above the Earth's surface. Due to their proximity to the Earth, they can be applied to low-latency networks, emergency communications, environmental monitoring, smart cities, low-altitude economy, and autonomous driving, among other sectors. The Starlink project of the aerospace company SpaceX owned by American tycoon Elon Musk is the most famous paradigm.

Hong Kong is renowned as an international financial centre, seemingly having little connection with the satellite industry. However, Hong Kong’s first-ever satellite manufacturing centre, located in Tseung Kwan O INNOPARK, has already manufactured nearly 38 satellites. With a future focus on smart-city business in the Greater Bay Area (GBA), USPACE Technology Group, the operator of the manufacturing centre, has proposed the "Golden Bauhinia Constellation" project, with the aim of manufacturing, launching, and operating 112 LEO satellites.

Leveraging the GBA Industrial Chain to Enhance Competitiveness

It is evident that, unlike traditional manufacturing industries, precision satellite manufacturing does not require large-scale land, making it particularly suitable for land-scarce Hong Kong. In comparison with Mainland cities, having a high degree of internationalisation and sound legal system, Hong Kong’s satellite products are potentially more acceptable to overseas customers, as demonstrated by a recent USD 21 million procurement contract signed between Interstellar Aerospace Technology and UAE-based TREEFAM Holdings L.L.C-FZ.

It is believed that start-ups involved in satellite design, manufacturing, and operations require substantial initial funding and high-level aerospace talent, both of which Hong Kong can fully accommodate. Furthermore, as one of the cities in the GBA, Hong Kong-based enterprises can leverage the comprehensive industrial chains in neighbouring cities to enhance their international competitiveness. Developing the LEO satellite industry chain could also further stimulate related professional services, including AI data analysis, patent protection, space law, space insurance, and financial products, and facilitate effective integration with Hong Kong's existing industries.

Following the launch of LEO satellites into near-Earth orbit, ground facilities are required for operational control and data reception. Enterprises operating such facilities in Hong Kong to control satellites must obtain an Outer Space Licence issued by the Chief Executive under the Outer Space Ordinance and a Space Station Carrier Licence issued by the Communications Authority under the Telecommunications Ordinance. LEO satellites have to operate as a network or constellation in order to effectively cover large surface areas of the Earth. According to the current Hong Kong legal framework, each satellite operated by Hong Kong-based enterprises must individually obtain these 2 licences to operate legally. This clearly illustrates the complexity of the approval process.

It is believed the Government's proposal to streamline the LEO satellite licensing process will facilitate the rapid development of local satellite manufacturing and operating enterprises and attract other related enterprises and experts to Hong Kong. In addition, the potential establishment of an efficient and transparent regulatory environment will possibly generate substantial licensing fees and tax revenue to alleviate the deficit of the Government.

According to McKinsey, the global space economy, led by commercial aerospace, is projected to reach USD 1.8 trillion by 2035. While the space economy offers promising prospects, it also entails fierce competition. Therefore, government strategies and support are particularly decisive. For instance, since 2013, the Singaporean government has established the Office for Space Technology and Industry (OSTIn), which has been proactively investing resources and nurturing talent to foster space economy-related industries. After years of effort, Singapore has boasted around 50 companies involved in space economy-related sectors, whereas Hong Kong has fewer than 5.

Formulating Industrial Policies and Cultivating Professional Talent

Despite having certain advantages in developing a LEO satellite industry, it is crucial for Hong Kong to grasp the opportunities and take proactive measures. Otherwise, Hong Kong may risk missing a valuable opportunity to optimise its industrial structure. Specifically, the Government should promptly formulate clear space industry policies and explicit development goals and roadmaps, including establishing corresponding government task forces, providing funding support for related research and start-ups, and offering tax incentives to relevant enterprises.

The Government could also encourage local universities to introduce specialised courses in aerospace engineering, satellite technology, and space law so as to cultivate local professionals. Additionally, favourable policies could be implemented to attract international experts and researchers to Hong Kong for the enhancement of the city’s innovative capabilities in space technology.

By streamlining regulatory processes, formulating supportive policies, focusing on high value-added fields, and nurturing talent, the Pearl of the Orient can secure a place in the global space economy, thus revitalising its future development.