Microstates were, for many centuries, the most common form of political structure in Europe. A handful of these tiny nations, such as Andorra, Liechtenstein, Monaco, and San Marino, still exist today. What makes these surviving countries so interesting is the seeming irrationality of their existence. While much larger empires have risen and fallen, microstates have somehow endured despite having limited land and natural resources. How? Because of their ability to reinvent themselves over the centuries.
To compensate for a lack of economic power and to counterbalance the substantial asymmetry with larger states, successful microstates have historically focused their economy on a select number of industries, leaving less relevant or uneconomical sectors aside. The great dilemma they face today is to determine which industries should be prioritized in the years to come. It is only through a focused economy that they will find a modern and invigorated economic and political raison d’être.
MICROSTATES AND THE NEW SPACE ECONOMY
An industry with high growth potential, almost unlimited development opportunities and of significant strategic interest is the space industry. Previously seen as a source of national pride reserved only for superpowers, space exploration has now become the focus of emerging and smaller nations due to its economic and strategic importance. But defining where commercial interests end and where military interests begin is no easy task. These are often overlapping areas which are slowly transforming space into a geopolitical ‘contested domain.’ It is exactly in this ambiguous reality that microstates could play a determining role.
There are two major fields of the so-called NewSpace economy in which microstates should focus their attention.
MICROSTATES AS INCUBATORS OF PRIVATE SPACE COMPANIES
In recent years we have seen the emergence of private firms which are pursuing commercial opportunities as suppliers for government-led space missions. These young companies have developed new business models and technologies, disrupting a sector that was in desperate need of innovation.
Some smaller nations have embraced this trend and have become active as space startup incubators. Luxembourg has grown into one of the leading space hubs in Europe by creating an attractive legal framework and by setting up financial schemes to either fund existing ventures or attract foreign space entrepreneurs. In Asia, Singapore has positioned itself as one of the world’s leaders in the miniaturized satellite industry. Both countries have big ambitions in this field and intend to become major players for space-related activities.
Monaco has also seen significant success in this area thanks to Orbital Solutions Monaco (OSM). As one of only two space companies in the principality, and the only one involved in the NewSpace sector, the firm launched Monaco’s first nanosatellite just one year after starting its activity in 2020. OSM has also pioneered an innovative scheme designed to help companies to accelerate the deployment of their fleet of small satellites for commercial applications without any upfront costs. OSM focuses on the application of miniature satellite technologies to the environment, climate and education, and also has an important pipeline of innovative commercial projects that it intends to develop. Its aim is to act as a technology aggregator to solve complex on-earth problems through simple outer space solutions. Bringing this expertise to Monaco represents a major step in the right direction for the principality.
MICROSTATES AS KEY PLAYERS IN NATIONAL SPACE STRATEGIES
In addition to incubating space-related startups, the other opportunity is in supporting emerging economies in their government-led space exploration. Some stronger emerging economies, such as China, the UAE, and India, have shown commitment and ambition in developing their own space programs. On the other hand, weaker emerging nations such as many African and Asian countries who are also interested in developing their own space programs, lack the resources and know-how required to operate alone.
Private companies could provide the required expertise, making the space sector accessible to them. However, China’s growing economic and technological strength has led to a backlash in the United States and Europe. We are seeing a new Sino-U.S. polarization where Chinese companies are vetoed from entering strategically important areas, such as 5G, in the U.S. and Europe due to a lack of trust. It’s likely therefore that smaller countries with political and economic links to Western powers may find it difficult to access Chinese space technology and vice versa.
Microstates could benefit from these stiffened international relations and become the solution to weaker emerging nations’ space development conundrum. Seen as too small to represent any significant threat to the international balance of power, especially in a critical industry such as space exploration, they could provide the needed technology and know-how to these weaker emerging nations. Through intra-governmental collaboration, microstates could train local engineers, provide innovative technology, and allow them to achieve independence in space exploration over time.
PERIPHERAL STRATEGIC COOPERATION
New economic cooperation in strategically sensitive industries could emerge at the margin of the Sino-American bipolar system beyond the NewSpace economy. By collaborating at the periphery, it is possible for smaller nations to create mutual benefits and maximize gains that exceed those that each might have obtained through unilateral action. This is what we call ‘peripheral strategic cooperation.’
Peripheral strategic cooperation will assume a growing geopolitical and economic relevance for microstates in the years to come. Being small and nonthreatening will become a strength. Finding the right positioning for microstates could, therefore, not only represent a major source of revenues but could also create the path to redefining their raison d’être on the geopolitical scene. Implementing peripheral strategic cooperation may be the only way to achieve this.
Massimo Passamonti is CEO and founding partner of Privatam, an investment firm with offices in Monaco and Zurich.
This article originally appeared in the October 2021 issue of SpaceNews magazine.