When Australian Prime Minister Anthony Albanese meets US President Donald Trump on Monday, the go to is anticipated to seal main massive tech funding offers on synthetic intelligence (AI) and information centres.
Within the lead-up, Atlassian cofounder Scott Farquhar (in his function 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 vision in a speech at the National Press Club of Australia wherein he held up Singapore and Estonia as proof that nimble regulation to draw overseas capital can flip nations into digital powerhouses.
However based mostly 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 an important second.
Nevertheless, as Australia advances its AI agenda, these examples can supply essential classes if learn extra fastidiously.
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 data embassy in Luxembourg.
Estonia’s case, although, is kind of totally different from what Farquhar proposes. After a collection of Russian cyberattacks in 2007, Estonia sought to ensure the continuity of presidency if its home techniques had been ever disabled.
The end result was a bilateral treaty with Luxembourg. The treaty permits encrypted copies of important state registries – citizenship, land and enterprise data – to be saved beneath Estonian jurisdiction overseas.
It was an act of defensive statecraft constructed on the Vienna Convention. This settlement grants diplomatic immunity to state features however explicitly excludes business exercise.
Against this, the digital embassies proposed by Farquhar would cater each to states and to overseas corporates. It might enable them to function beneath their very own regulation however draw on Australian sources.
Farquhar himself concedes this could necessitate revising the Vienna Conference. However this could undermine six many years of established diplomatic observe and additional destabilise an already fragile worldwide system.
With out the diplomatic costume, Farquhar’s digital embassies look extra like special economic 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 usually 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 corporations.
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, recent Australian Tax Office data reveals main expertise corporations – resembling Amazon Net Companies, 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 Companies earned $3.4 billion regionally 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 resembling Eire by inter-company “service charges”.
US tech corporations have undoubtedly captured vital home worth. Nevertheless, native advantages, resembling jobs, exportable digital industries and international 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 may construct a “Silicon Beach” right here. This echoed Eire’s “Silicon Docks” – a digital progress technique of making a deregulated haven for large tech.
Farquhar’s AI-hub imaginative and prescient appeals to the identical logic. Nevertheless, 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 favourable relations with the US make it an inevitable frontier of data-centre growth. But that place additionally provides Australia leverage to outline sovereign progress by itself phrases.
As economist Alison Pennington has asked, “is a shift from foreign-owned mining to foreign-owned information mining with even much less management the perfect we will do?”
If Australia needs to construct a resilient and credible AI sector, it gained’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 a substitute, Australia may 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, University of Auckland, Waipapa Taumata Rau
This text is republished from The Conversation beneath a Inventive Commons license. Learn the original article.
