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Astana International Financial Center gains momentum

By Hussei Chaihanoe | chinadaily.com.cn | Updated: 2019-03-01 15:38

Office building of AIFC, Astana. [Photo by ea-monitor.kz]

Kazakhstan, a young and ambitious state, has always been famous for the originality of its decisions attracting foreign investors into the country, News Central Asia reports. The creation of the Astana International Financial Center was no exception, but rather confirmed established traditions. It turned out to be a unique project for the Commonwealth of Independent States. With the help of its own court, arbitration, exchange and regulator, it is poised to become the "center" of investment into the economy of Kazakhstan.

As the initiator and main organizer of the AIFC, Kazakhstan President Nursultan Nazarbayev acted decisively. During one of his public speeches, "Plan of the Nation 100 Steps in 5 Institutional Reforms", he voiced an extraordinary idea – to create AIFC in Astana based on the infrastructure of the 2017 Astana Expo. A similar center in Dubai became a reference point.

Key components include the consolidation of a special legal status for a financial center in the Constitution, and the establishment of a center as a financial hub for CIS countries as well as the entire region of West and Central Asia — this is how the Kazakh leader outlined priorities, securing the existence of AIFC with the necessary decree.

Another essential element is the creation of an independent judiciary with its own jurisdiction, which will operate on the principles of English law. The judiciary was formed with help from a number of foreign experts. In the future, the financial hub of Kazakhstan should enter the 20 advanced financial centers of the world.

The rest was, figuratively speaking, a technicality. During Nazarbayev's official visit to the UK, the president met with Jacob Rothschild, the renowned banker. In just a couple of days, the Kazakh parliament consolidated the status of the AIFC by law. And almost a year ago in January 2018, the International Financial Center "Astana" received its official start.

What is attractive about AIFC for foreign investors? First of all, unprecedented preferential conditions throughout the region, including independent financial regulation based on international standards. Key posts here are given to the British — recognized experts in jurisprudence and international law. The English justice system is known worldwide, and London is recognized by international legal centers. Thus, this aspect is a guarantee of an unbiased and fair trial.

In addition the AIFC establishes a special legal regime that does not depend on the judicial system of Kazakhstan and is based solely on the principles of English law. English is also recognized as the official language of work on AIFC territory. The status and judges of the AIFC, which guarantee the protection of the rights and interests of foreign investors, emphasizes the aspirations of Kazakhstan to obtain an impeccable image and create favorable conditions for large transnational companies.

There is a long list of benefits for investors. These include tax preferences for a period of 50 years — AIFC participants are exempt from paying individual and corporate income tax until Jan 1, 2066. Among other things, there is also a simplified visa and employment regime. Foreign employees of AIFC as well as family members receive an entry visa valid for up to five years. Citizens of OECD countries, United Arab Emirates, Malaysia, Singapore and Monaco, as well as countries designated by the government of Kazakhstan, are entitled to visa-free entry for up to 30 calendar days. And a small but pleasant bonus is the free rental of Class-A offices in the first two years of operation.

Kazakhstan, therefore, shows maximum loyalty to foreign investors and creating a favorable investment climate here has become a top political and economic priority. To solve the problems of foreign entrepreneurs in the country at first, a special Ministry for Investment and Development was created whose administrative barriers were reduced. It worked successfully until the end of last year, and, having completed its task, it was reorganized. The remaining functions and powers were transferred to the Ministry of National Economy and the Ministry of Foreign Affairs of the Republic of Kazakhstan. If we add the diplomatic multi-vector policy that Nazarbayev has adhered to all these years, it is not surprising Kazakhstani proposals are in considerable demand, and foreign visits and summits in Astana end with business forums and new contracts.

The results are also obvious. Even before opening, more than 55 companies registered with the AIFC. According to the manager of the International Financial Center Astana Kairat Kelimbetov, by 2020 their number should exceed 500.

"For us, the key indicator of efficiency, given that we do not collect taxes from financial institutions, will be the volume of attracted foreign investments,"Kelimbetov said.

We believe that this is common sense. These investments would never have come to Kazakhstan. Tens of billions of dollars of investment means the creation of new jobs and an increase in consumer demand in our country. For us, this will be a big plus.

According to former Prime Minister Bakytzhan Sagintayev at the plenary session of the Astana Finance Days Forum, the AIFC will significantly expand international opportunities of Kazakhstan itself, allowing it to find and take its place in the overall pattern.

"Kazakhstan considers the AIFC part of the global financial system," the former head of government noted.

The global chain of financial centers that manage global cash flows passes through almost the entire globe — from Toronto to Sydney and from Tokyo to New York. Each has its own niche.

For its part the AIFC, having a unique geographical position, will provide access to the markets of Central Asia, the Eurasian Economic Union, the Transcaucasus and the countries of the Middle East.

“Astana is one of the key links of the new transcontinental routes of the global initiative Belt and Road,” Sagintayev said.

Therefore, the AIFC will become a natural financial and economic bridge between western China, Mongolia and the countries of Europe. All this opens up access to a giant market for more than 1 billion people.

Meanwhile in Western expert circles, there is support for the idea a new financial bridge has appeared in the world between Europe and Asia. According to preliminary forecasts by Kazakh authorities, the AIFC will be able to attract billions in investment in the country’s economy. The plans of Kazakhstan are, of course, evaluated as ambitious but, given current conditions are quite feasible. Astana is well aware competition for investors is increasing every day, and only a promising product that meets the requirements of the realities of the world economy can attract investment. This means Kazakhstan will have to deliver.

The author is an observer on Central Asia affairs based in Beijing.

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