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September 26, 2021

Financial services centre in Astana

Five institutional reforms declared by the President of Kazakhstan Nursultan Nazarbayev and the Hundred Concrete Steps Program for implementation of these reforms have become a new starting point in the development of Kazakhstan. As a part of the reforms, Astana International Financial Centre (AIFC) was established with a special legal status.

The AIFC is the brainchild of Kazakh President N. Nazarbayev who voiced the idea to set up the Centre in 2015 with benefits offered to companies, an independent court and English common law principles incorporated in the work of the Centre.

The new financial centre, located at the site of EXPO-2017, is set to offer a wide range of financial services in technologies, green finance, capital market and asset management.

The Centre has a management council, a financial services regulator, AIFC exchange, an independent financial court involving nine judges from the U.K., and an arbitration.

Kazakhstan has become the first country in the region to create an international financial centre based on common law, which is unique for the post-Soviet space.

Kazakhstan thoroughly studied the global experience in establishment, development and work of financial centres across the world including in Singapore, Dubai, Hong Kong and other countries. The Kazakhstan model of the AIFC incorporated best practices of these structures.

As the President N. Nazarbayev said, “Astana should become the main financial hub of the region and in long-term perspective should be among leading Asian financial centres”.

The AIFC has a number of objectives. It will attract foreign investment, open up the Kazakh banking sector and make it easier for insurance companies and Islamic finance institutions to do business. It will attract world leaders in financial services, which in turn will promote best practices in Kazakhstan. It can be expected that the AIFC will boost Kazakhstan’s economic stability and help the country along the path to becoming a top 30 global economy by 2050.

The Centre enjoys a special legal regime envisioned by constitutional law and offers incentives to companies, including exemption from corporate income tax and personal income tax for 50 years, a visa-free regime for citizens of 48 countries and a simplified employment regime.

Why English common law principles? English law is characterized by flexibility and convenience encouraging countries to rely on it in the finance sector. The AIFC is a great opportunity and platform for Kazakhstan and region to develop deeper financial market and attract investment.

Transparent, reliable and favorable normative base for the market, modern infrastructure and strong human capital will boost the potential of the AIFC in reaching the scale of a regional hub, an example of innovation use, high quality services, effective management and reasonable methods of dispute settlement.

The main goal of AIFC, like of any other state reform, is to improve welfare of Kazakhstan residents. Various aspects of the AIFC shall allow improving the approaches to managing sovereign wealth funds and facilitating the transfer of foreign knowledge and technology to the country, thus, ensuring an increase and the development of human capital. The deteriorating conditions in foreign markets and unfavorable geopolitical situation in the world, only justify the need for a financial Centre – it is important now more than ever to attract new investments in financial capital, as well as in technology and human capital.

In order to establish AIFC as a local Centre of expertise with a developed capital market and later to develop it into a regional platform for financial intermediation, the strategy for the development of AIFC has been developed until 2021. Implementing the initial phase of the development of the AIFC shall serve as a solid foundation for realizing of subsequent phases, namely, development into a regional financial centre, and eventually, into an international financial centre.

The economy of Kazakhstan has grown significantly, and the population’s standard of living has risen. Large-scale reforms are being carried out in the country. Launching AIFC is an important step in the consistent sustainable development of Kazakhstan.

The financial centre has already given Astana a new status of “financial capital”. In the ranking of global financial centres, the city’s positions in the last year rose by 27 points. Astana will continue to develop as a “smart city” with comfortable conditions created for the lives of citizens and guests of the capital.

Kazakhstan expects the Centre to attract $40 billion of investments by 2025. About 60 companies have now joined the AIFC. By 2020, this number is planned to increase to 500. The AIFC cooperates with all multilateral financial institutions, such as the World Bank, IMF, EBRD, ADB, AIIB. All of them are strategic partners of the AIFC. An important part of the centre is the stock exchange, whose partners are the Shanghai Stock Exchange and the New York NASDAQ.

In conclusion, what should be highlighted and what is interesting about the AIFC is that it will be a truly international financial centre, a place where people can come and do business no matter where they originate in the world. First, AIFC has the law courts which apply English common law and are led by foreign judges. Then AIFC has the arbitration centre and the independent regulator which operate based on the best regulatory schemes around the world. All of these are aimed to ensure transparency and high level of regulation.

In light of the above, Kazakhstan invites all interested companies, financiers and managers of Romania to take part in the work of AIFC. The Centre is open and ready to provide all the necessary support and information for those who wish to work in Astana.

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