New international financial centre in Kazakhstan sees early growth and success

Friday, 07 December 2018 16:02
Astana aims to become a financial hub for Central Asia and the wider region Astana aims to become a financial hub for Central Asia and the wider region
This December, three years have passed since the law “On the Astana International Financial Centre (AIFC)” was approved, which provided the legal framework for its functioning as well as a favourable environment for the participants.
After a long preparatory work, the AIFC in the capital of Kazakhstan officially launched on July 5 this year. So far, 88 participants have registered at the exchange, and by 2020, Kazakhstan authorities have announced the target of more than 500 companies participating in the AIFC.

Astana has set an ambitious goal for AIFC – to become a financial hub for Central Asia, the Caucasus, Eurasian Economic Union, the Middle East, West China, Mongolia and Europe.

AIFC, a self-styled “mid-shore” special economic zone, has an attractive business environment and the presence of a separate legal and regulatory system based on the principles of the British Common law. These measures will assure fairness and justice in its operations and will enhance the credibility of Kazakhstan in the eyes of the investors.

The AIFC Court is separate and independent from the courts of the Republic of Kazakhstan. There is a Court of Appeal whose decisions are final.

“The AIFC Court operates to the highest international standards to resolve civil and commercial disputes in the AIFC. It has exclusive jurisdiction over disputes arising out of the activities and operations of the AIFC and jurisdiction in the case of other disputes in which all parties agree in writing to give the AIFC Court jurisdiction,” said chairman of the court of the international financial center, Lord Woolf.

Lord Harry Kenneth Woolf is a renowned judge in recent British legal history and a global figure on the common law, courts and dispute resolution, and legal education. He will work with eight other British high level lawyers and judges in Kazakhstan.

Moreover, the International Arbitration Centre at the AIFC has its own panel of international arbitrators and mediators who are experienced, independent and impartial.

“The International Arbitration Centre seeks to establish and develop a fully independent arbitration and alternative dispute resolution system for the expeditious resolution of civil and commercial disputes characterized by reliability, fairness and accessibility, unconditional application of the rule of law, and flexibility that is responsive to the needs of global business markets,” Barbara Dohmann, Chairman of arbitration body, with experience as arbitrator at the London Metal Exchange, the Paris International Chamber of Commerce and the Hong Kong International Arbitration Centre, emphasized.

The system of English justice is known far beyond England, the authority of the chairman of the court of the financial centre is a guarantee of a qualitative and truly fair judicial system. The decision of the lawyers of the AIFC is a priority, and in its work the court of the centre is absolutely autonomous.

Strategic partners of AIFC Exchange are global leaders of the exchange industry - Shanghai Stock Exchange and Nasdaq exchange group. It is also planned that the Astana International Finance Centre (AIX) will be connected to the Bloomberg Terminal.

China has already demonstrated its support for the AIFC with assistance in strategic and business planning, technology consulting, and developing a strategy for expanding the market.

“The Shanghai Stock Exchange is a 25 percent shareholder and they are contributing staff and resources but more importantly they are providing a gateway for us to talk to Chinese funds, Chinese brokers,” chief executive and director of Astana International Exchange Timothy Bennett, who has previously run New Zealand’s Stock Exchange, told Reuters.

“On the regulatory level, one of the big opportunities for us is RMB [Chinese Yuan] and the ability to trade, clear and settle in RMB and their help with the regulatory process around that is very beneficial,” he added.

NASDAQ, for its own part, will help in the development of technologies for easy access of investors to financial instruments using its Nasdaq Matching Engine system.

The world’s biggest uranium producer Kazatomprom became the first company to be listed on the stock exchange in November. The company also made its long anticipated stock market debut on the London Stock Exchange (LSE).

In addition to Kazatomprom, some 49 foreign, 16 domestic legal entities and 2,700 Kazakh citizens took part in the IPO in November.

In the near future, shares of the three state-controlled companies, including the national oil and gas company KazMunayGas, railway operator Kazakh Railways, air carrier Air Astana, power producer Samruk Energy, mining companies are also due to float on the stock exchange in the Kazakh capital

“Within the framework of the comprehensive privatization plan, six companies of Samruk-Kazyna Fund will go to IPO. This is a new stage in the development of the national companies of Kazakhstan,” said CEO of the Kazakh sovereign wealth fund Akhmetzhan Yesimov at the opening of trading in November.

“This year, the AIFC ranks 61 and we plan to join the top 50 international financial centres in the next three years. Eighty-eight companies have already registered and we plan that up to 500 companies will be registered by the end of 2020,” said AIFC Governor Kairat Kelimbetov, a former governor of the central bank.

Tim Stanley, Senior Managing Director for Russia/CIS, based in Control Risks’ Moscow office, argued that the launch of AIFC will help in the future to build confidence in Kazakhstan.

“You see that Kazakhstan represents minimal political risks compared to its neighbors in the region, and its average rating corresponds to such countries as Russia and Brazil. ... Economic dependence on oil and gas, raw materials will remain, while efforts are being made to diversify the economy,” he said during the Astana Finance Days Forum, which was held in July.

“The pressure on business continues to decline, e-government will promote this and will help to reduce corruption. The new Tax Code will also have a favorable effect on this,” he added.

The world seems to be witnessing the emergence of a new financial bridge between Europe and Asia. According to preliminary forecasts by Mr Kelimbetov, the AIFC should attract up to $5 billion in FDI by no later than 2023 and up to $40 billion within a decade.

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