When Australian Prime Minister Anthony Albanese meets US President Donald Trump on Monday, the go to is predicted to seal main huge 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 international 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 talk about Australia’s tech future at a vital 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 can be data-centres on Australian soil owned by international firms and exempt from Australian legislation. 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 had been ever disabled.

The end result was a bilateral treaty with Luxembourg. The treaty permits encrypted copies of vital 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 capabilities however explicitly excludes industrial exercise.

Against this, the digital embassies proposed by Farquhar would cater each to states and to international corporates. It could permit them to function beneath their very own legislation however draw on Australian assets.

Farquhar himself concedes this could necessitate revising the Vienna Conference. However this could undermine six a long time of established diplomatic observe 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 way of 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 international direct funding has rested on large state-led funding and fairness in infrastructure and companies.

By 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 special path.

For instance, latest Australian Tax Workplace information reveals main expertise companies – comparable to Amazon Internet 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 Internet Companies 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 comparable to Eire by way of inter-company “service charges”.

US tech firms have undoubtedly captured important home worth. Nonetheless, native advantages, comparable to 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 informed then prime minister Julia Gillard they might construct a “Silicon Seaside” 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 attain AI hub standing.

Some will argue Australia’s minerals and beneficial relations with the US make it an inevitable frontier of data-centre enlargement. But that place additionally provides 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 information mining with even much less management the very best we will 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 a substitute, Australia might 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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