Almaty Seeks Role as Central Asian Financial Centre

ALMATY – Almaty is the biggest city in Kazakhstan, with a population of 1.5 million people, representing nearly 10 percent of the population of Kazakhstan. It is located in the centre of the Eurasian continent and known as the financial, business, cultural, historical, scientific, education and industrial centre of the country. Alma-Ata, as the city was then know, was also the capital of the Kazakh Soviet Socialist Republic from 1929 to 1991, and then the first capital of an independent Kazakhstan until 1997, when the capital was transferred to Astana.

Almaty has an ancient and rich history. As а transit point on the Great Silk Road, the city was a center of international trade in Central Asia. Silk traders from China and sellers of ivory and spices from India would meet here to leave a unique mark on the culture of the city.

The traditions of modern Almaty are composed of cultural practices from various eras and nations, which are easily combined to form a unique multi-ethnic identity. Almaty combines traditions of the East and the West, the ways of nomads and settled peoples. Here, one can see a combination of ancient traditions, Soviet culture and modern global trends.

The new 2030 General Plan of Almaty was developed in 1998 and aims to form ecologically safe, secure and socially comfortable living conditions. The main objective is to promote Almaty’s image as a garden city. (Almaty former name of Alma-Ata was translated as The Father of Apples, with alma meaning apple in Kazakh. The area around the city has been identified by both national and international scientists as the birthplace of apples.)

As the largest city in the country and the nation’s capital at its independence in 1991, it was inevitable that the success of those policies would transform Almaty into a major transportation hub and regional centre for visiting foreign businesspeople and investors. Thus, despite losing its status as the capital, Almaty remains the major financial and business centre of Kazakhstan.

Its status as the financial and business centre of the country is supported by a high concentration of banking and industrial capital in Almaty. The headquarters and the management of the majority of financial institutions and industrial companies are located in the city. Key regulating and controlling institutions, such as the National Bank of Kazakhstan (central bank of the country) and the Kazakhstan Stock Exchange (KASE) are also located here.

Nowadays, the city provides:

• 1/5th of the national GDP;

• 1/3rd of all tax revenues;

• Over 50 percent of wholesale and retail operations;

• The 1/6th of the foreign trade turnover of Kazakhstan;

• 14 percent of all new housing commissioned;

• 18 percent of all investments of Kazakhstan; and

• 1/3rd of all goods and services produced by small and medium-sized businesses.

The economic growth and high concentration of financial capital became the basis of the foundation of the Regional Financial Centre of Almaty City (RFCA). The project of the creation of the regional financial center in the city of Almaty was initiated by President Nursultan Nazarbayev.

The main objectives of RFCA have been identified as:

• Establishment of a world-class financial centre, which will facilitate the successful integration of the Kazakhstan financial industry with international stock markets;

• Attraction of foreign investment, further development of the Kazakhstan stock market, increasing its capitalization and liquidity, the attraction of private investors to the stock market, and creating conditions for the export of Kazakhstan capital.

The mission of RFCA is the creation of conditions and effective mechanism for Kazakhstan’s integration in world economy by the formation and successful functioning of the financial centre, attractive for all participants as an internal market of country.

According to many experts, RFCA will act as a financial hub, attracting international investment funds as well as listed companies. RFCA is a logical step to further diversify the Kazakhstan economy and reduce dependence on natural resources. The Kazakhstan government expects that the centre will increase the domestic stock market and promote reforms of the real sector of the economy.

The establishment of RFCA in February 2007 has played a leading role in this case, which performs the main tasks of not only attracting foreign investors into Kazakhstan, but also involving the construction of the infrastructure.

Senior Manager of Hong Kong Stock Exchange Jeffrey Tang says that cooperation of the exchange with Kazakhstan trade zones has been quite active. Thus, in December 2007, the Hong Kong Stock Exchange and RFCA signed a Memorandum of Understanding agreement on recognition of each other, which is a good opportunity to continue constructive dialogue, develop relations between markets and share information.

According to the exchange representative, the growth prospects of the stock market in Kazakhstan are large and optimistic. He also noted that RFCA sets out to become a top Central Asian financial centre and offers the opportunity for Central Asian companies to be listed at the exchange are quite realistic and interesting. “Moreover, we are pleased to hear about RFCA success and development and that new project and regulations are being introduced,” Tang said.

“We hope that there will be established a highly liquid, modern financial centre with its own listing rules, which can be acceptable for international investors. These are the priority expectations of the financial institutions, which want to enter the market of Kazakhstan for a long period,” the analyst stated.

However, any stock exchange needs a well-defined system with convenient and high-quality rules both for issuers and investors.

“This is enormously difficult work. It is hard to finish in 1-2 years; we spent 20-30 years in order to build such a system. We are ready to share the experience since the evolution of the exchange is quite a long process. Our experience shows that the development of the stock market and the Hong Kong exchange in particular helped Chinese companies in their search for capital; the first listing procedure was organised more than 15 years ago,” the Hong Kong Stock Exchange representative said.

According to sources close to the London Stock Exchange, generally the development of the stock market in Kazakhstan has been quite successful. Today, the results of RFCA work are obvious. One such success is the integration of Kazakhstan Stock Exchange and RFCA Special Trade Floor. The source states that Kazakhstan has all the potential to become the leading financial center in Central Asia.

However, on the other hand, analysts are positive that it is necessary to focus on the attraction of domestic investors because the Kazakhstan stock market is still small for foreign retail and institutional investors. It also remains important to attract retail investors; in comparison to the institutional investors, the retail investors are more involved in stable investment and less responsive to various world market fluctuations.

Furthermore, the absence of developed tenge based instruments will make it impossible to develop Almaty as a regional financial centre in the future. The focus on the development of secondary infrastructure factors for the stock market growth can deteriorate the security level of domestic financial markets.

Nowadays, many financial centres with competitive advantages are emerging in the world. To compete with such centres, experts agree that it is necessary to continue developing Almaty as a Regional Financial Centre, meeting international standards.

In addition to being a financial centre, Almaty is also recognised as a university town. Such universities as the Almaty Institute of Power Engineering & Telecommunications; Kazakh-British Technical University; Kimep (Kazakhstan Institute of Management, Economics, & Strategic Research); Al-Farabi Kazakh National University (KazUU); Kazakh National Technical University (KazNTU); SuleymanDemirel University (SDU); Kazakh-American University (KAU); Kazakh Academy of Sciences; Almaty State University (named after Abay); Turan University; Kazakhstan University of Global Relationships & Languages; Central Asian University are all providing international standards of education to students from across the country and beyond.

It has already been announced that the Third Conference of Asian University Presidents will be held at the Al-Farabi Kazakh National University in Almaty in 2014. More than 20 universities of the Asia-Pacific Region fought for the right to host this event. The Steering Committee made a decision to conduct the forum in Almaty based on the Al-Farabi Kazakh National University’s achievements and high positions in the international rankings.

Moreover, Almaty won its bid to host the 2011 Winter Asian Games and it will also become the capital of the 28th Winter Universiade-2017. However, the city is working on future bids, including the 2018 Winter Olympics.

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