Op-Ed: AIFC has promising future - Kairat Kelimbetov
The official unveiling ceremony of the Astana International Financial Center (AIFC) will be held on the sidelines of the Astana Finance Days in early July during the celebrations of the 20th anniversary of the Kazakh capital. AIFC Governor Kairat Kelimbetov sat down with Kazinform correspondent to share the details about two years the Center was in the making, its plans for the future and target indicators of the financial platform created in Kazakhstan.
The official presentation of AIFC will be held in July. But as a matter of fact we began operating since January 1, 2018 in line with the Constitutional Law. Over two years we've been busy laying the groundwork for the Center - we've adopted 47 laws and regulations within the framework of the English common law. These laws represent the best practice of such international financial centers as London, Dubai, Singapore, and Hong Kong. Besides, special institutes have been established, including the Astana Financial Services Authority (AFSA) and the Astana International Exchange (AIX) which has partnered with the Shanghai Stock Exchange and NASDAQ to become the main platform for privatization in Kazakhstan. A presentation of the companies which are part of Samruk-Kazyna Sovereign Welfare Fund has been held recently in Shanghai. It sparked keen interest of Chinese financial institutions and investment companies. The interest is due to the fact that Kazakhstan perfectly fits into the model of the One Belt, One Road program and similarities in the New Economic Policy "Nurly Zhol and China's Silk Road Economic Belt Initiative. It was Head of State [Nursultan Nazarbayev] who came up with the idea to create AIFC in 2015 which required the establishment of a special economic zone operating under the principles of English common law. I would like to note that during the Investor's Day of Samruk-Kazyna SWF on the sidelines of the Boao Forum for Asia in Shanghai and at meetings in Beijing Chinese partners took a great interest in the projects in Kazakhstan, privatization processes and cooperation with Kazakhstan, in general.
Why is China so interested in Kazakhstan, including the privatization processes and AIFC activities?
It is crucial for Kazakhstan to attract investment in order to create new workplaces and modernize its enterprises and industrial facilities. For China, which has become the world's second-largest economy, it is important to carry out the One Belt, One Road program and develop contacts with the rest of the world through development of hard (highways, railways) and soft (legislative, economic institutions) infrastructure. For Central Asian countries the One Belt, One Road initiative means the revival of the role of the Great Silk Road. In that respect, our interests coincide with those of China. We welcome the arrival of financial institutions from Asia, including China, and want to create all conditions which meet the world's best practice. The entire world is fighting for Chinese investments; European and Latin American countries compete to attract those investments as well. Kazakhstan happens to be the first country to offer a land bridge between European markets and western regions of China. You know that under the instruction of the Head of our State there have been built a railway line linking Khorgos with the border of Turkmenistan, the Aktau Sea Port, Azerbaijan, Georgia, Turkey and Eastern Europe and through the territory of Russia we get to sea ports of Western Europe. Our transport authorities forecast that Kazakhstan will earn extra $5 billion through those routes (up to 2 million containers will cross the territory of Kazakhstan). It will give us a chance to develop our manufacturing and create added value on the territory of our country. For China it is a further advance, they are buying up infrastructure and port facilities in Western and Eastern China. That is why it is so important for Kazakhstan to be a part of this ambitious program.
What risks do privatization processes, including China's interest, pose to Kazakhstan's national security? Is there a check-and-balance system in that respect?
It is a delicate question, on the one hand, and a simple one, on the other. Our companies operate on the territory of Kazakhstan. The infrastructure is in Kazakhstan and it can't be relocated outside its boundaries. Of course, there are parameters of national security and certain measures: the government gets to keep majority stakes and monitors day-to-day functioning of those enterprises. I believe that we carry out well-balanced and consistent policy in that respect and there are no reasons for concern. If you remember, the People's IPO program initially offered 5-7%. Now we are talking about selling off 20-25% through the Initial Public Offering. If you take a look at the international practice, privatization, as a rule, gets positive feedback, because the money which will come will work for the development of country's economy. We can't isolate ourselves from the world, instead, we should integrate into the global economy and benefit from it. I would like to once again emphasize that the entire world is fighting for Chinese investments. Kazakhstan is China's closets neighbor. We can't create an impression that we don't need investments. They are crucial for the development of our economy. I believe that well-balanced and wise policy of Kazakhstani authorities creates favorable conditions for inflow of investments.
What role will China play in AIFC in the future?
First of all, the Shanghai Stock Exchange owns a 25% stake of AIFC Exchange. NASDAQ also owns a stake. Perhaps, AIFC is the only platform these days where American and Chinese companies work on an exchange together. The idea is to build a bridge between liquidity markets and the Shanghai Stock Exchange will be our reliable partner in that process. In the future Shanghai will become the world's financial center and that is why it is so important to keep in touch with them through that AIFC Exchange. China's top 5 banks also display keen interest and want to participate in AIFC activities. CITIC Securities, Haitong, Shenwan Hongyuan expressed their interest as well. Those companies have billion-dollar portfolios and want to be involved in the privatization programs and development of stock market in Kazakhstan. We believe that Kazakhstan and all Central Asian countries will eventually benefit from the creation of the infrastructure investment hub in Kazakhstan within the framework of the One Belt, One Road initiative. As you know, at the meeting with heads of Central Asian countries in early March in Astana the President of Kazakhstan suggested AIFC as an international financial hub. Joint trade and joint business always bring countries closer. From the perspective of national security for us it is important to have good relations with our neighbors, therefore, AIFC can become a regional hub uniting Asian and European markets. Mutual access of Chinese and Kazakhstani financial institutions to their markets uncover vast opportunities. At the recent Boao Forum for Asia held on April 8-11 Chinese President Xi Jinping vowed China will become more open to the outside world. It is a very important message to all our agricultural, mining and processing enterprises as it offers more opportunities for access to the Chinese market.
There are only two months left until the AIFC official launch. Is everything 100% ready for the launch?
We are putting the finishing touches. There are no problems. Many companies have already begun the registration process. The China Development Bank, one of the world's largest development banks, was the first Chinese institution to register with us. What we plan to do is a proper campaign to get Chinese investors and financial institutions acquainted with AIFC, so they could start working at the Center after its official launch. We hope that the privatization processes will begin by yearend - Samruk-Kazyna SWF will file a number of its companies for IPO and privatization will be carried out through AIFC platform. As you may remember, some companies used to be filed for IPO in London or Hong Kong. This time around we have perfect conditions - we have AIFC Exchange which meets the world's highest requirements. AIFC will expand when more companies register with us. We expect that up to 100 companies will register with us until yearend, up to 250 companies in 2019 and up to 500 companies until the end of 2020. Let's look at the example of Dubai which has been functioning since 2004. At first, the Dubai International Financial Center worked slowly, but nowadays the number of registered companies from all over the world exceeds one thousand. We also hope that AIFC will take rightful place in the global ranking of international financial hubs. Its future looks promising.
Every high-profile stock exchange has its index. Will AIFC Exchange have one?
We are working on it. In order to get index, the exchange needs recognition. I think we will achieve this goal in a couple of years. What is the AIFC HR Policy? Is the personnel ready for the launch? AIFC staff is not that big - we have a little over 100 people working there, in addition to staff working at the Astana Financial Services Authority, AIFC Court and Exchange. In the long view we expect up to 20,000 highly skilled specialists to work at AIFC. Here we have two options: either invite specialists from abroad or hire local workforce. We look forward to AIFC becoming the point of attraction of all highly-skilled personnel in Kazakhstan. We want to build a pool of highly-skilled certified financial experts fluent in English who can work for any international company in the world. In order to help them get international certificates, we have established a special AIFC bureau where we offer courses, training and additional certification. In the upcoming years, 5,000 young specialists will attend those courses. That will allow us to create an outsourcing center in Kazakhstan.
How will AIFC affect Kazakhstan enterprises?
We want to create conditions allowing domestic public and private enterprises as well as companies with international capital attract foreign investments. Enterprises themselves should meet the world's highest standards. I believe that AIFC will stimulate business in Kazakhstan and enhance its competitiveness. AIFC is one of those opportunities which will help improve Kazakhstan's investment climate not only for foreign capital but also for domestic investors.
When will the opening ceremony of AIFC take place?
We have invited up to 2,000 guests. It will be a big investment summit which will take place on July 3-5. We call it Astana Finance Days. On July 4, Kazakhstan will host the World Islamic Economic Forum for the second time. We are organizing it together with Malaysia. The same day Astana will host the One Belt, One Road forum. We have invited the leadership of China's leading financial institutions to the forum during this very trip. The official international presentation of AIFC timed to the 20th anniversary of our capital city - Astana - will be held on July 5. Thank you for the interview!