When Australian Prime Minister Anthony Albanese meets US President Donald Trump on Monday, the go to is anticipated to seal main large tech funding offers on synthetic intelligence (AI) and information centres.
Within the lead-up, Atlassian cofounder Scott Farquhar (in his position as chair of the Tech Council of Australia) has been pitching a plan to make Australia a “regional AI hub”.
In July, Farquhar unveiled his imaginative and prescient in a speech on the Nationwide Press Membership of Australia through which he held up Singapore and Estonia as proof that nimble regulation to draw overseas capital can flip nations into digital powerhouses.
However primarily based on my analysis on the geopolitics of data-centre markets, these examples don’t fairly maintain up – and following them dangers narrowing the controversy about Australia’s tech future at a vital second.
Nonetheless, as Australia advances its AI agenda, these examples can provide essential classes if learn extra rigorously.
The Estonian information embassy
Farquhar proposes Australia ought to host “digital embassies”. These can be data-centres on Australian soil owned by overseas corporations and exempt from Australian regulation. He cites as a precedent Estonia’s information embassy in Luxembourg.
Estonia’s case, although, is kind of totally different from what Farquhar proposes. After a sequence of Russian cyberattacks in 2007, Estonia sought to ensure the continuity of presidency if its home methods had been ever disabled.
The outcome was a bilateral treaty with Luxembourg. The treaty permits encrypted copies of important state registries – citizenship, land and enterprise information – to be saved beneath Estonian jurisdiction overseas.
It was an act of defensive statecraft constructed on the Vienna Conference. This settlement grants diplomatic immunity to state features however explicitly excludes industrial exercise.
Against this, the digital embassies proposed by Farquhar would cater each to states and to overseas corporates. It will enable them to function beneath their very own regulation however draw on Australian sources.
Farquhar himself concedes this may necessitate revising the Vienna Conference. However this may undermine six a long time of established diplomatic follow and additional destabilise an already fragile worldwide system.
With out the diplomatic costume, Farquhar’s digital embassies look extra like particular financial zones. These are areas designed to draw funding by the strategic loosening of legal guidelines.
What actually reworked Singapore
Farquhar’s studying of Singapore’s instance equally overlooks its deeper financial and political foundations.
Singapore is commonly romanticised by neoliberal thinkers as a haven of free enterprise. However Singapore’s success in utilizing its pure strengths and overseas direct funding has rested on huge state-led funding and fairness in infrastructure and companies.
By means of its sovereign wealth funds, Temasek and GIC, Singapore retains dominant stakes in its airways, banks, ports and telecoms. That very same strategic state funding produced Changi Airport and the Jurong Industrial Property, cornerstones of Singapore’s regional hub standing.
Australia has taken a unique path.
For instance, latest Australian Tax Workplace information reveals main know-how companies – akin to Amazon Net Providers, Microsoft and Google – have secured billions in authorities contracts whereas contributing comparatively little in tax.
In 2024, Microsoft reported $8.63 billion in Australian income, however solely $118 million – about 1.4% – was payable in tax. Amazon Net Providers earned $3.4 billion domestically but paid simply $61 million after deductions decreased its taxable earnings to $204 million.
A lot of that is defined by profit-shifting preparations. Most income is booked in tax havens akin to Eire by inter-company “service fees”.
US tech corporations have undoubtedly captured vital home worth. Nonetheless, native advantages, akin to jobs, exportable digital industries and world competitiveness, stay largely hypothetical.
A cloudy reminiscence
Australia has chased the dream of jurisdictional deregulation earlier than.
Greater than a decade in the past, Google and Microsoft instructed then prime minister Julia Gillard they might construct a “Silicon Beach” right here. This echoed Eire’s “Silicon Docks” – a digital progress technique of making a deregulated haven for giant tech.
Farquhar’s AI-hub imaginative and prescient appeals to the identical logic. Nonetheless, it has even thinner appreciation for the statecraft and public funding required.
With out it, Australia is unlikely to realize AI hub standing.
Some will argue Australia’s minerals and beneficial relations with the US make it an inevitable frontier of data-centre growth. But that place additionally offers Australia leverage to outline sovereign progress by itself phrases.
As economist Alison Pennington has requested, “is a shift from foreign-owned mining to foreign-owned data mining with even less control the best we can do?”
If Australia desires to construct a resilient and credible AI sector, it received’t discover its edge by becoming a member of the worldwide race to the underside – puncturing its territory with authorized carve-outs and filling them with foreign-owned and unfettered direct funding.
As an alternative, Australia might construct a mannequin of sovereign management by investing in public infrastructure, expertise and governance frameworks that safe nationwide types of possession and accountability.
Angus Dowell, PhD Candidate, College of Auckland, Waipapa Taumata Rau
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