Last year, Astana’s revenues exceeded the level of 400 billion tenge. In the year before 2015, this figure was less than almost 50 billion. The opposite situation is developing in Almaty – where the growth rate of cash receipts in the city treasury is declining for the second year in a row.
Analysts consider such a significant trend – the largest Kazakhstan’s megacity, which for decades has been considered the financial center of the republic, seems to be gradually giving the palm of financial precedence to the young capital. According to experts, this way the business environment of the two cities is preparing to launch the International Financial Center «Astana».
The decree on the establishment of the IFC Kazakh President Nursultan Nazarbayev signed in May 2015. The head of state has repeatedly expressed confidence that the future financial center will become the core of the financial infrastructure of Kazakhstan, the largest financial hub of the entire Central Asian region. To become such a project gradually realized, not only huge ambitions and unprecedented scale, but also, as you can see, already shifting accents in the distribution of business activity of Kazakhstan, expressed in a noticeable reversal of the inflow of capital from Almaty to Astana.
Starting July 1 of this year, the process of registration of participants of the international financial center starts. The international stock exchange should earn on the IFCA site from September 1, 2017, but full-fledged operation is planned for January 2018. It is during this period that the key institutions of the center will operate, including an independent court based on English law, international investment arbitration, a stock exchange and an independent regulator.
The fact that IFC will be held as the main financial hub of the Central Asian region, and later as a global business center, is still too early to speak, the project has not yet entered into force, although the prerequisites for attaining such a high status are indisputable. But the very fact of the fact that the project will work is already obvious, and this despite the world economic background, which is not an easy economic one.
The idea of creating such center in Kazakhstan was discussed for several years. Initially, it was planned to develop a regional financial center in Almaty, but this was prevented by the crisis of 2008-2009, when all the necessary legislative initiatives were not implemented. After a while the conditions changed, and it was decided to create not just a regional center, but in the long term a financial center pretending to world authority, already in Astana.
The tasks facing IFAC are not less global. The center will work in five strategic areas. The main one is the development of the capital market (capital markets), including taking into account the large-scale privatization that the government planned together with the welfare national fund «Samruk-Kazyna». Within its framework, it is planned to withdraw the fund companies to an IPO through the stock exchange of the IFAC. The second direction – the development of the market and expertise in asset management (asset management). The third direction of activity will be the development of the private wealth management market, the fourth – the development of the market of Islamic finance services (Islamic finance) in the entire post-Soviet space. And the last, no less important sphere is the improvement of the financial technologies market.
Registration of project participants is not far, and as one noted in the IFAC, interest in it is shown not only by foreign companies, but also by local players. However, they do not intend to make any concessions to the Kazakh investment companies, on the contrary, they are called upon to improve their business reputation and improve the qualification of their staff. Only one principle will operate here: you or compete, or not, the heads of the financial center «Astana» note.
With the creating the model of functioning of IFAC, the experience of the world’s largest financial institutions – the oldest financial centers of New York, London, Dubai and Singapore – was taken into account. With the latter, the Kazakh analogue, in the first place, has a similar geographic location. If Singapore is in a convenient time zone for trade – between the West and the East, then Astana is located right in the center of Eurasia, which is certainly a huge advantage. But this is not the main trump card of the Kazakhstan IFAC. As in Singapore, and in Astana will be special, unprecedented for the Central Asian region, preferential terms of investment business.
To assist in attracting investments into the economy of Kazakhstan, IFCA intends to create an attractive environment for investing in financial services, developing the securities market, ensuring its integration with international capital markets. The financial center also intends to develop insurance and banking services in the country, in addition to the above-mentioned market of Islamic financing.
Here is how the manager of IFC Kairat Kelimbetov describes the device of the future center in one of many interviews with Kazakhstani media: «I think that this is rather a new legal space. This is a jurisdiction where English commercial law will operate, and all investment disputes will be conducted within its framework. Let’s look at London, New York, Hong Kong or Singapore – all these large financial centers work according to English law. Also, IFC will have its own independent court – which means that it will not become part of the Kazakh judicial system».
One of the benefits is the simplified labor legislation. Since January 1 of this year, citizens of almost all developed countries can come to Kazakhstan visa-free for 30 days, and the employees of the center will be granted a five-year long-term visa. The visa regime is facilitated by the Constitutional Law not only for employees and participants of the IFAC, but also for members of their families. Another part of the benefits – tax preferences, close to those in Dubai. It is supposed to be exempt from CIT and PIT, land and property tax for a period of 50 years.
The main consumers of services of the Kazakh financial center are partners and regulators of the countries of the Eurasian Economic Union and Central Asia, as well as China. Negotiations on the creation of a new, high-tech exchange platform based on the principles of the best world practice are held with London, Hong Kong and Shanghai. Until 2020, the financial center «Astana» plans to enter the top 10 Asian financial centers, which is quite ambitious. IFCA should become a driver of growth of financial and service services on the part of Kazakhstan companies. In the next decade, about 18,000 jobs are planned to be created here, about 3,000 Kazakh experts – financiers, lawyers, consultants – can take part. All of them will have to speak English, since this is the working language of the functioning of the entire center. It is planned that IFCA contribution to the economic growth of the republic will be at least 1% of non-oil GDP.
As for the state’s investments in the creation of the IFC, it seems that no special expenses, in particular, for the construction of infrastructure, are not needed. After the exhibition EXPO-2017 financial center will be given to two large pavilions. They will only have to be converted to class A offices. Then the project should reach self-sufficiency. In any case, the start is put and only time can show what will be conceived as a unique, Kazakhstan’s financial center. Will he be able to stand on par with the already established, recognized by the world community, financial institutions. The foundation for achieving the goal is not bad. Some of the major foreign educational institutions, as well as financial centers, are ready to provide their support and partnership to IFCA, other authoritative world financial market participants are likely to join them in the future.