The Astana International Financial Centre (AIFC), the new financial centre of the Silk Road
The Astana International Financial Centre (AIFC) was created in Kazakhstan in 2015 by former President Nursultan Nazarbayev within the “100 Concrete Steps” Plan of the Nation to achieve the country’s ambition of joining the top 30 developed countries by 2050. It started on 5 July 2018 as a financial hub for the countries of Central Asia, the Caucasus, Eurasian Economic Union (EAEU)(1), Middle East, Western China, Mongolia and Europe, a regional hub of Chinese President Xi Jin Ping's 2013 Belt and Road initiative, which will cover about 60 countries of the world, with a total population of over 4 billion people and a GDP of about 2 trillion $. The goal is to be in the top 20 leading Asian financial centres before 2028.
Kazakhstan has a 4.5% 5-year expected GDP growth rate, a 2019 nominal GDP of 170 billion $ and GDP/capita of 9,300 $, is #25 in the World Bank's 2020 Ease of doing business ranking and #1 in FDI stock per capita and in FDI stock to GDP ratio, in Central Asia.
AIFC headquarters is an impressive 1632-ha structure, located in the heart of capital city Nur-Sultan (formerly Astana) on the EXPO-2017 International Specialized Exhibition infrastructure.
AIFC is the first financial centre in Eastern Europe and Central Asia. According to The Global Financial Centres Index GFCI28 of September 2020, Astana is #74 in the world.
Membership
The AIFC has registered 563 companies among which:
- 107 companies in Kazakhstan including the largest banks: the Halyk Savings Bank, the Eurasian Bank, the Zaman-Bank..., the Kazakhstan Investment Development Fund (KIDF), the Kazakhstan Energy Reinsurance Company...;
- 12 Russian companies including Lukoil;
- 8 British companies;
- 6 companies from Finland including the Qazaq-Finnish Technology Center;
- 5 Chinese banks: the China CITIC Bank and its subsidiary Altyn Bank in Kazakhstan, the China Development Bank (CDB) and the China Construction Bank (CCB)...;
- 4 companies from Hong Kong including China International Capital Corporation (CICC) Hong Kong Securities;
- 3 US companies including EY;
- 2 Singapore companies including the Paladigm Bank;
- and several companies from the Czech Republic, Estonia, Hungary (the Hungarian Export-Import Bank), India (Tengri Partners Investment Banking, a subsidiary of the Punjab National Bank), Italy, Latvia, Malaysia, the Netherlands, Ukraine, the United Arab Emirates and Yemen.
Among the 563 companies, there are 112 Ancillary Service Providers registered in the following activities: legal, consulting, audit, accounting, IT, blockchain, climate and renewable energy, credit rating, urban planning, HR, Shariah compliance, tax consulting, cybersecurity, education, mining, oil, etc.; 22 FinTech Lab Participants (among which the Small Business Stock Exchange) and 14 Special Purpose Companies (SPCs) investing in US bonds, oil, emerging market bonds, US equities...
IFC Activities
Capital markets, asset management (global and local private equity, hedge funds and real estate funds...), private banking (investment and portfolio consulting, tax and investment planning, asset allocation), FinTech (new FinTech products in a light Regulatory Sandbox regime, along with a specialised regulatory environment (the FinTech Lab), which allows companies to offer their innovative financial services in a safe environment, without the full burden of regulatory requirements), Islamic finance (a regional hub under the Advisory Council on Islamic Finance (ACIF) and the Central Shari’ah Advisory Board with the planned issuance of corporate and sovereign Islamic securities (sukuk)), green finance (green bonds based on the ICMA Green Bonds Principles and the Climate Bonds Initiative systematics).
Market: AIX
There are two Market Institutions registered with AIFC: the Astana International Exchange (AIX) and the Astana International Exchange Central Securities Depository, the clearing organization.
The Astana International Exchange (AIX) is owned by the Shanghai Stock Exchange, Nasdaq, Goldman Sachs, and the Silk Road Fund in China. The main purpose of the AIX is to host the IPOs of state-owned enterprises controlled by Kazakhstan’s sovereign wealth fund, Samruk-Kazyna, with estimated assets of 75 billion $. Trading in equities started on 14th November 2018 with the listing of Kazatomprom and it is anticipated that Samruk-Kazyna will IPO Air Astana and other companies by 2022. Currently AIX lists 69 instruments and has a market capitalization of 950 million $ as of October 2020.(2)(3).
Financial instruments listed on AIX
Sovereign bonds (Kazakhstan), bonds (Kazakhtelecom, Kazakhstan Mortgage Company, Halyk Savings Bank, China Construction Bank (CCB)...), sukuk bonds (Qatar International Islamic Bank (QIIB)) and green bonds, shares (Halyk Savings Bank, euronotes (Kazakhstan), ETNs and notes (Kazpost), global depositary receipts (GDRs) (Kazatomprom, Halyk Savings Bank, ...).
AIFC Governance
The Astana Financial Services Authority (AFSA) provides for the regulation of AIFC, the authorization, registration, recognition and supervision of AIFC financial firms and market institutions, in line with the International Organisation of Securities Commissions (IOSCO), International Association of Insurance Supervisors (IAIS), Basel Committee on Banking Supervision (BCBS), Islamic Financial Services Board (IFSB) and Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
Management
The AIFC Management Council is a permanent collegial body chaired by the president of the Republic of Kazakhstan and composed of the prime minister, the minister of finance, the minister of economy, the governor of the central bank, the governor of AIFC, the chairman of J.P.Morgan Chase International, the president of the Islamic Development Bank Group, the CEO and chairman of Sberbank of Russia, the co-founder and CEO of Yandex Russian multinational company, Julie Monaco of Citigroup...
Disputes and Resolutions
The application of common law is implemented for the first time in the post-Soviet space at the AIFC. The AIFC Court considers civil and commercial disputes between participants of AIFC, AIFC bodies and (or) their foreign employees, staffed by mostly British judges, with extensive experience in the judicial systems of England, Wales, Qatar and Hong Kong. And the AIFC International Arbitration Centre (IAC), also chaired by a judge at the High Court of England and Wales and at the Qatar International Court of Justice.
Outcome
AIFC is uniquely placed to be the reference financial centre of Central Asia and of the Silk Road, considering the significant presence of the main Chinese banks along with many participants from the West
and the East. The capitalization should increase substantially with the IPOs of state-owned enterprises controlled by Kazakhstan’s sovereign wealth fund, Samruk-Kazyna. AIFC has organized markets for most modern financial instruments (Islamic finance, green bonds, GDRs...). And Kazakhstan is the largest recipient of total and annual foreign direct investment of all CIS countries (24 billion $ in 2019).
(1) Eurasian Economic Union (EAEU) is an economic union of states located in Eastern Europe, Central Asia and Western Asia, based in Moscow
(2) Kazakhstan, Asia Frontier Capital - Link
(3) There is also the Kazakhstan Stock Exchange (KASE), created in Almaty on 30th December 1993 listing 120 companies: 97 from Kazakhstan, 7 from Russia and 14 from the U.S. (including companies like Apple, Coca-Cola, Intel, Microsoft and Tesla) and 2 GDRs (Kcell and Kazatomprom).
Originally appears on: https://www.agefi.lu/Fax-Article.aspx?date=27-10-2020&fax=4976&rubr=4942&art=62469&query=aifc