BERLIN (REUTERS) - Facing tough competition from China, the United States and even tiny Luxembourg, Germany is racing to draft new laws and attract private investment to secure a slice of an emerging space market that could be worth US$1 trillion (S$1.36 trillion) a year by the 2040s.

The drive to give Germany a bigger role in space comes as European, Asian and US companies stake out ground in an evolving segment that promises contracts for everything from exploration to mining of outer-space resources.

Companies likely to benefit from any future spending rise in Germany include Airbus, which co-owns the maker of Europe's Ariane space rockets, and Bremen-based OHB.

The new legislation would limit financial and legal liabilities of private companies should accidents happen in orbit, set standards for space operations and offer incentives for new projects, the German economy ministry told Reuters.

The ministry's aerospace and space commissioner, Mr Thomas Jarzombek, could submit the laws to Parliament later this year.

The move comes as companies and trade groups press for German authorities to establish a regulatory framework for the lucrative new market to encourage private investment.

"We are sounding the alarm that Germany and Europe are falling behind in space vis-a-vis China and the United States," Mr Dirk Hoke, defence and space chief at Franco-German-led aerospace group Airbus, told Reuters.

"We're at a critical juncture to ensure we stay in the top league."

Germany is Europe's economic powerhouse and the world's fourth-largest economy. However, it had just the world's seventh-largest national space budget in 2018, an estimated US$1.1 billion, just over half the amount generated by fifth-placed France, according to preliminary data from Paris-based research firm Euroconsult.

The figure, which excludes contributions to pan-European programmes, is dwarfed by the US - by far the largest spender on space at almost US$40 billion.

Ironically, American space ambitions could offer a lifeline.

Mr Hoke said a new lunar Gateway programme backed by US space agency Nasa offered a chance for Germany and others in Europe to stake a claim to a key role in the market.

"In my view, it is hugely important that we participate as equal partners so that we are primed to develop and build technologies for such a gateway," he said.

The programme involves designing and developing a small spaceship that will orbit the moon and serve as a temporary home for astronauts and as a base for work on the moon's surface and, later, missions to Mars.

Nasa had aimed to finish the Gateway by 2026, but Washington is now aiming to put humans back on the moon by 2024, which could lead to an accelerated schedule.

Even before then, Germany is facing a brain-drain as companies worldwide ponder how to extract minerals from asteroids and water from the moon within a decade.

Some companies are already considering moving to Luxembourg, which has taken a lead in Europe by enacting laws to limit liabilities and ease restrictions on mining operations. It has also set up a €100 million (S$152 million) investment fund for projects.

"It's a global market. We have our customers and we will keep them, even if we have to run the company from somewhere else," said Mr Walter Ballheimer, chief executive officer of German Orbital Systems, a Berlin-based start-up that builds small satellites.

"Germany was overtaken a long time ago," he said. "But it's not too late. If they are courageous enough and adopt a clear space policy...then we can still have a piece of the cake that we should have as a leading export nation."

Two other heads of small German space companies told Reuters they were considering leaving the country.

But Germany is not standing still.

Space commissioner Jarzombek is working with trade groups, companies and other experts to draft the space laws, and plans to submit it them parliament sometime after September.

"We are aiming for a lean basic law that is open to the future," said a spokesman for Mr Jarzombek and the economy ministry. "A national space law should focus above all on incentives and make it possible for the German space industry to play a bigger role in global developments."

Berlin is also pressing the United Nations to set standards for mining of the moon, asteroids and other objects in space.

The US passed a law in 2015 that encouraged private companies to undertake mining work beyond Earth, and gives its firms the right to claim resources they may one day be able to extract from celestial bodies.

Mr Jarzombek helped secure a €269 million increase in planned funding for the European Space Agency in 2020-2023. But Germany's total space funding, which includes European Space Agency and national programmes, is not expected to rise in that period.

It edged slightly lower to €1.57 billion in 2019.

The 18-member European Space Agency oversees cooperation on space exploration and launches, but individual countries have their own research and interests, funded outside the European Space Agency budget.

Mr Matthias Wachter, aerospace expert at the BDI German Federation of Industry, said advances in space were crucial for future technologies such as autonomous driving.

"Germany is limping behind," he said.

Any spending plans would have to contend with rising budget pressures and an economic slowdown. Germany is in its 10th year of expansion, but only narrowly avoided recession last year.

Senior executives from Deutsche Bank and Munich Re and others met in Berlin this month to brainstorm ways to fund and insure new space projects.

One problem is Germany's conservative approach to investment and financing as entrepreneurs seek capital, said Mr Sebastian Straube, CEO of investment firm Interstellar Ventures.

Mr Straube is building a €100 million investment fund that will fund projects. He is also working with companies like rail operator Deutsche Bahn to encourage them to support new ventures that build applications taking advantage of increased access to space through satellites in low-earth orbit.

Mr Marco Fuchs, CEO of satellite builder OHB, said Germany needed bigger increases in national space funding to pay for pioneering developments, citing growing competition worldwide.

The company carried out a privately funded commercial mission with China to orbit the moon in 2014, and teamed up this year with Israel Aerospace Industries to offer the commercial delivery of payloads to the lunar surface for the European Space Agency.

OHB is a key player in the battle between Europe's new Ariane 6 rocket and the Falcon 9 built by Mr Elon Musk's SpaceX to launch the first of two new OHB spy satellites, called Georg, for Germany's foreign intelligence agency in 2022.

The contract, worth tens of millions of dollars, is drawing political attention after SpaceX and Ariane traded barbs about access to each other's markets, which could presage a transatlantic trade dispute in coming years.

OHB and the German government are expected to select the winner by late 2020, and Mr Fuchs said the decision would be based on many factors, including launch dates and available budgets.

"In the end, it's always a question of the price - or a political decision," he said.