June 1, 2023

How a Central Asian Financial Hub Hopes to Change the Region

If one looked at the global map of international financial centres before 2018, a notable gap would have been visible in Central Asia. This changed five years ago when the Astana International Financial Centre (AIFC) was launched in July 2018.

We initially faced challenges as the first country in the region to launch such a major project, but we persevered to achieve our long-term objectives, including supporting Kazakhstan in its efforts to attract investment. Today, almost 2,000 companies operate at the AIFC, and $8 billion of investments have been attracted to Kazakhstan’s economy.

The geopolitical stresses and economic challenges caused by the conflict in Ukraine have created a situation where financial institutions and investors are looking to cooperate with partners from Central Asia, a region that is now playing a key role in facilitating trade and financial deals between Asia and Europe. Over the past 20 years, Central Asia’s combined GDP has grown more than sevenfold and at an average rate of 6.2%, which is faster than in developing countries and more than twice as fast as the world as a whole.

In this regard, the AIFC has created favorable conditions for large-scale investments in major infrastructure projects, including the Trans-Caspian International Transport Route, which facilitates cross-border trade in the Eurasian space.

The AIFC uses the English common law as its legal modus operandi. This ensures fair and impartial decisions that are legally enforceable within the country. Financial disputes are considered by British judges at the AIFC Court and the international arbitration centre, both independent of the country’s legal system. In addition, a favourable tax regime has been established for AIFC participants, which complies with the global standards of tax transparency set by the OECD.

In only five years, AIFC’s Astana International Exchange (AIX) has created a world-class capital market and established itself as a reliable and secure trading platform that offers a complete business cycle, including trading and clearing operations. It has provided global investors with access to Kazakhstan, while also enabling local and international issuers to raise funds in the Kazakh and global markets. AIX has so far attracted more than $356 million of equity and $2.68 billion of debt capital.

The AIFC was also the first to introduce green and sustainable development principles into the financial ecosystem of the country and the region. We are in the process of developing the carbon market of Kazakhstan and creating a platform for trading carbon units. We are also engaged in implementing green and social bonds, and subsidies for green projects.

AIFC’s Tech Hub, meanwhile, is dedicated to promoting the development of startups, a venture capital market, e-commerce, and corporate innovation. Tech Hub has attracted around 300 technological, ICT, and fintech companies from around the world to register within the AIFC jurisdiction. It has supported around 200 startups so far.

Given the global situation, our growing role is not surprising. Emerging markets like Kazakhstan are becoming more noticed by international investors. There are good reasons for this. Emerging markets outperformed developed economies in the two decades prior to the pandemic. As developed markets continue to face economic challenges, the role of emerging markets like Kazakhstan is becoming more prominent.

Kazakhstan’s economy, which grew by 3.2% in 2022, is now almost one-third bigger than the economies of other Central Asian countries combined and around 60 percent of foreign investment in the region falls on Kazakhstan. Our economy has proved resilient to geopolitical shocks. Kazakhstan continues to rank first in the region in terms of foreign direct investments thanks to our economic stability, abundant natural resources, strong commodity market fundamentals, political and economic reforms, as well as 13 special economic zones with tax incentives.

Active cooperation with global stakeholders is key to ensuring that our region and international investors can make full use of our country’s new status. In this regard, Kazakhstan is hosting the Astana International Forum and Astana Finance Days in June, which will bring together senior government representatives from across the world and members of international organisations and business circles to discuss ways to navigate current global challenges, including getting back to global growth, and how Central Asia, including Kazakhstan, can contribute to this.

When the AIFC was established half a decade ago, we set the ambitious goal to become the acknowledged financial gateway for Central Asia and provide partners and investors access to the wider Eurasian region, United Arab Emirates, Saudi Arabia, and Western China. We wanted to play a major role in improving links between Asia and Europe, spreading prosperity across the region, and strengthening links with the global economy. I believe we have achieved these objectives. Now we are working towards becoming a global centre for business and finance, connecting the economies of Eurasia. Given the trajectory, I have no doubt that we will remain in a prime position to meet the needs of both investors and our region.