When Australian Prime Minister Anthony Albanese meets US President Donald Trump on Monday, the visit shall be expected to secure major major technology investment deals in artificial intelligence (AI) and data centers.
First up was Atlassian co-founder Scott Farquhar (in his role as Chair of the Tech Council of Australia). draw up a plan Making Australia a “regional AI hub”.
In July, Farquhar revealed his vision in a speech on the National Press Club of Australia In it, he cited Singapore and Estonia as evidence that clever regulation to draw foreign capital can turn nations into digital powerhouses.
But based on my research into the geopolitics of knowledge center markets, these examples don't entirely hold water – and following them risks limiting the controversy about Australia's technology future at a vital moment.
However, as Australia advances its AI agenda, these examples can provide essential insights upon closer reading.
The Estonian Data Embassy
Farquhar suggests Australia should host “digital embassies”. These are data centers on Australian soil owned by foreign firms and exempt from Australian law. He cites Estonia as a precedent Data message in Luxembourg.
However, Estonia's case is significantly different from what Farquhar suggests. After a series of Russian cyberattacks in 2007, Estonia sought to make sure government continuity if its domestic systems were ever taken offline.
The result was a bilateral agreement with Luxembourg. The contract allows encrypted copies of key state registers – citizenship, land registry and business records – to be stored abroad under Estonian jurisdiction.
It was an act of defensive statecraft that built on the muse Vienna Convention. This agreement grants diplomatic immunity from government tasks, but expressly excludes industrial activities.
In contrast, Farquhar's proposed digital messages would goal each states and foreign firms. This would allow them to operate under their very own law but draw on Australian resources.
Farquhar himself admits that this may require a revision of the Vienna Convention. However, this may undermine six many years of established diplomatic practice and further destabilize an already fragile international system.
Without the diplomatic costume, Farquhar's digital messages look more like Special economic zones. These are areas which are intended to draw investment through strategic leisure of laws.
What really modified Singapore
Farquhar's interpretation of the Singapore example also overlooks its deeper economic and political foundations.
Singapore is commonly romanticized by neoliberal thinkers as a haven without spending a dime enterprise. But Singapore's success in capitalizing on its natural strengths and foreign direct investment has relied on massive government investment and equity in infrastructure and businesses.
Through its sovereign wealth funds Temasek and GIC, Singapore retains dominant stakes in its airlines, banks, ports and telecommunications firms. The same strategic government investment produced Changi Airport and the Jurong Industrial Estate, cornerstones of Singapore's status as a regional hub.
Australia has taken a special path.
For example, Current Australian Taxation Office data shows that big technology firms – like Amazon Web Services, Microsoft and Google – win billions of dollars in government contracts while paying relatively little in taxes.
In 2024, Microsoft reported Australian revenue of $8.63 billion, but only $118 million – about 1.4% – was due in taxes. Amazon Web Services earned $3.4 billion locally but paid just $61 million after deductions reduced its taxable income to $204 million.
Much of that is because of profit shifting agreements. In tax havens like Ireland, most revenue is recognized through intercompany “service fees.”
U.S. technology firms have undoubtedly generated significant domestic value. However, local advantages equivalent to jobs, exportable digital industries and global competitiveness remain largely hypothetical.
A hazy memory
Australia has pursued the dream of judicial deregulation before.
More than a decade ago, Google and Microsoft told then-Prime Minister Julia Gillard they might create a “Silicon Beach” here. This reflected Ireland’s “Silicon Docks” – a digital growth technique to create a deregulated haven for giant tech firms.
Farquhar's AI Hub vision is predicated on the identical logic. However, appreciation for the statecraft and public investment required is even lower.
Without it, Australia is unlikely to realize AI hub status.
Some will disagree with Australia's Minerals and favorable relations with the USA making it an inevitable limit for data center expansion. But this position also gives Australia the chance to define government growth by itself terms.
As an economist Alison Pennington asked“Is a shift from foreign-owned mining to foreign-owned data mining with even less control the perfect we will do?”
If Australia wants to construct a resilient and credible AI sector, it’ll not gain its advantage by joining the worldwide race to the underside – by riddling its territory with legal spin-offs and filling them with foreign and unrestricted direct investment.
Instead, Australia could construct a model of sovereign control by investing in public infrastructure, skills and governance frameworks that secure national types of ownership and accountability.
