When Australian Prime Minister Anthony Albanese meets US President Donald Trump on Monday, the go to is predicted 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 an important second.
Nonetheless, as Australia advances its AI agenda, these examples can supply necessary classes if learn extra fastidiously.
The Estonian information embassy
Farquhar proposes Australia ought to host “digital embassies”. These could be data-centres on Australian soil owned by overseas firms 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 collection of Russian cyberattacks in 2007, Estonia sought to ensure the continuity of presidency if its home techniques have been ever disabled.
The outcome was a bilateral treaty with Luxembourg. The treaty permits encrypted copies of essential state registries – citizenship, land and enterprise data – to be saved below Estonian jurisdiction overseas.
It was an act of defensive statecraft constructed on the Vienna Conference. This settlement grants diplomatic immunity to state capabilities however explicitly excludes industrial exercise.
In contrast, the digital embassies proposed by Farquhar would cater each to states and to overseas corporates. It could permit them to function below their very own regulation however draw on Australian sources.
Farquhar himself concedes this might necessitate revising the Vienna Conference. However this might undermine six a long time of established diplomatic apply 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 remodeled 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 large 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 exhibits main know-how companies – akin to Amazon Internet 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 Internet Providers earned $3.4 billion regionally but paid simply $61 million after deductions diminished 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 charges”.
US tech firms have undoubtedly captured important 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 may construct a “Silicon Seaside” right here. This echoed Eire’s “Silicon Docks” – a digital development 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 provides Australia leverage to outline sovereign development by itself phrases.
As economist Alison Pennington has requested, “is a shift from foreign-owned mining to foreign-owned information mining with even much less management the perfect we are able to 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, abilities 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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