The world’s great financial centres of New York, London, and Tokyo have led the way in economic prosperity for decades. But the giants are now facing competition from dozens of smaller, ambitious challengers. Cities in Asia, the Middle East and Africa can increasingly offer investors better access to some of the world’s fastest growing financial markets.
Among the cities moving up the financial ranks, catching up to Dubai, Shanghai and Johannesburg, is Astana. Kazakhstan’s capital has surged ahead in the Global Financial Cities Index and is now ranked ahead of Warsaw and Moscow.
President Nursultan Nazarbayev clearly sees the city’s potential. At the Astana Economic Forum (AEF) earlier this year, he announced his plan to create the Astana International Financial Centre (AIFC), an ambitious project to cement Kazakhstan’s position as a leading centre for finance.
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 AIFC will launch against the backdrop of challenges affecting countries throughout Eurasia. President Nazarbayev has spoken of three such challenges: uncertainty and conflict in Europe and the Middle East, climate change and food security. The nature of such threats demands cooperation between nations and action from international institutions, such as the United Nations. But the Kazakh President is clear: Kazakhstan can help mitigate these threats to its own future by taking action now. That means diversifying the economy and tapping into new financial opportunities. The AIFC can play a role in both.
Set to officially launch on Jan. 1, 2018, the AIFC will use the innovative infrastructure already built for EXPO 2017. It will be modelled on Dubai’s own financial centre. Kazakhstan has already hired consultants from Dubai who will help with the establishment of the AIFC. Like Dubai, the AIFC will feature a financial court with international judges and a legal framework based on the principles of English law. English will also be used in official documentation and court proceedings. This will reassure investors and promote transparency and best practices. Experts have been impressed with how Dubai has boosted investor confidence in its transparency and reliability. So it is reassuring that Kazakhstan will regularly speak to counterparts at the DIFC Court to ensure the AIFC is progressing.
The new centre will see the National Bank and the Kazakhstan Stock Exchange relocating from Almaty to Astana. The President has also proposed listing the five most successful companies in the Samruk Kazyna Soveregin Wealth Fund on the stock exchange. Both these measures will offer new opportunities to investors and boost growth for Kazakhstan.
While the country can be optimistic about such an ambitious project, challenges remain. The centre faces a battle in convincing those already working in Kazakhstan’s financial sector that this is a positive step. Some have raised concerns that the centre may put institutions already operating in Kazakhstan under threat. Others have expressed unease over the decision to exempt AIFC residents from taxes. And while it is widely acknowledged that the AIFC is seeking external advice, some want to be reassured that there will be no issues of conflict of interest between Kazakhstan’s legislation and the AIFC’s legislation. To ease any lingering tensions, the AIFC should work in close partnership with both local and international experts.
But none of these challenges are insurmountable. Kazakhstan should not allow such challenges to thwart its pursuit of becoming a major global financial hub. The centre represents an unprecedented opportunity for Kazakhstan to strengthen its economy and attract world class international investment. The AIFC can only be seen as a significant step forward in turning Astana into the financial capital of Central Asia.