PERSONALITY K. Kelimbetov: “We see the AIFC as an
WE SEE THE AIFC AS AN IMPORTANT FINANCIAL CENTRE IN THE WORLD AND LEADING IN THE REGION ”
Governor of the Astana International Financial Centre (AIFC) Kairat Kelimbetov,
– Kazakhstan is not among the leaders in the financial sector. This is a country mainly focused on oil exports. Therefore, it is interesting, what was the reason for the turn to financial markets? In short, what was the origin of the AIFC concept? – By the way, economy’s orientation on the raw materials has become the reason for the turn to financial markets. In a broader sense, one of the areas of development of non-primary industries.
The movement aimed in this direction in Kazakhstan began long ago, long before the fall of oil prices in 2014. A course towards diversification was taken back in 2009, as part of the annual Address to the people, which is given by the first President N. Nazarbayev. As a consequence, there was made a state program for accelerated industrial and innovative development, that is still valid. Later, N. Nazarbayev said: “The global economic system might seriously fail already in 2013–2014, and, in particular, cause a collapse in world prices for raw materials.” During his Address to the People in 2012.
The fall of the oil prices, which began in 2014, confirmed the correctness of this statement. Until now, oil prices remain volatile and they are influenced by different factors. Thus, the country has a clear understanding that relying on oil revenues alone will not ensure sustainable long-term development.
Kazakhstan has embarked on the realization of its industrial potential. There are high hopes for the agricultural sector. In general, there are many areas in which we can move. The goals and objectives of economic diversification are enshrined in all strategic documents.
In order to develop the economy and ensure access to capital, it is simply nec
essary to have a developed financial system. The banking sector has been and remains as the most important component, and banks in Kazakhstan are quite developed. This is the first branch of our economy, after the commodity sector, which rapidly developed and began meeting international standards. But its weaknesses were shown by the 2008 crisis. One of the drawbacks of the system that existed was, for instance, a weak stock market, which, as a rule, is more resistant to external shocks.
Afterward, there is a question of investment. I believe that attracting investment is critically important both for Russia and Kazakhstan. State investment can not solve all the problems. It also inevitably creates distortions in the economy. We need a private investor, whom we must interest and attract.
In due course, about $ 330 billion of foreign investment came to Kazakhstan, mostly in the commodity sector. At present, in order to realize diversification we must provide investment in non-resource sectors for accelerated growth in the new conditions.
Moreover, both external and internal investments are required. The country has funds, however, opportunities to invest them into business are limited. This situation is similar to Russia. When there are no such opportunities, capital begins to go abroad, or lies as a dead weight. Share capital is a way for citizens to invest into the economy and increase them.
AIFC in perspective creates conditions for the economy in sequence to develop capital market, which should solve the issue of attracting both internal and external investments. For this, the state even took an unprecedented step –the introduction of a separate jurisdiction. In the AIFC, justice is based on English law. This is an independent court that includes nine judges-international experts. They are all British, all of them are recognized experts and highly respected both in their own country and worldwide. For example, the first head of the Court was Lord Woolf, formerly the supreme judge of England and Wales, a member of The Court of Appeal of the High Court of Hong Kong, and the first chairman of the Civil and Commercial Court of the Qatar Financial Centre in Doha. The AIFC also has an International Arbitration Centre. It is also created on the basis of international standards and consists of independent international arbitrators.
The special jurisdiction of the AIFC was embodied in the Constitution. Accordingly, on December 7, 2015, Nursultan Nazarbayev signed the Constitutional Law “On the AIFC”, according to which the corresponding changes were made to the Supreme Law.
All these actions have been done to protect investors. Investor must be sure that the risk for his investments does not exceed normal commercial risk, and that he will not face arbitrariness, disputes will be resolved according to the law that is understandable to him. It is common that outside the countries of the first world, large investors try to secure state guarantees. But what if we want to attract not one but hundreds of investors, both large and not so? It is unrealistic to give personal guarantees to everyone. For this, a separate jurisdiction was created, clearly fixed at the level of the state’s Constitution.
All this became the reason why Kazakhstan created an international financial centre. We have created a new stock exchange in cooperation with NASDAQ and the Shanghai Stock Exchange; an asset and wealth management market for individuals and Islamic finance and fintech are being developed.
AIFC aspires to achieve a number of goals. Firstly, the development of the country's financial market. Secondly, the promotion of investment. Thirdly, the integration of Kazakhstan into the global financial system. And the last but not least, is the development of the region, the creation of a developed network of economic ties in it.
– In this case, what markets does the financial centre rely on, which regions do you see as the main areas in which the AIFC will develop? What place does the AIFC take in the process of Eurasian integration? – Kazakhstan is guided by the multi-vector course in foreign policy, which was formulated by N. Nazarbayev. Therefore, the AIFC is also guided by the course of this policy, we see ourselves as a set of institutions on the basis of which a productive interaction is created between the economies of Kazakhstan and its neighbors. And not just the neighbors.
We have three key areas of cooperation: Central Asia; EAEU countries; Belt and Road Initiative.
Here we see that the main areas of development cover the countries that are neighboring us. Russia and China are not only the powerful countries, but also the largest trading partners of Kazakhstan.
China participates in Kazakhstan’s economy mainly in the sphere of infrastructure and raw materials projects. The potential for trading with the PRC is generally believed to be huge. There is an opportunity to earnestly increase, primarily, the agricultural production. On the other hand, China is actively investing in infrastructure in the region. However, for the effectiveness of trade and investment there must be an open area working in accordance with international standards. AIFC is that kind of area.
The same applies to the EAEU, and its largest participant – Russia. The institutions which will bring cooperation to the new level are needed; they are also expected to attract investors, provide attracting conditions for them. In general, we need an infrastructure of financial flows, trust and guarantees. These are the things we are trying to implement in the AIFC. This, of course, is a long process, but we have already begun, and there are several achievements in this direction.
Undoubtedly, the Central Asian region is a key area. Here, the necessity for such an institution as the AIFC is not only our interest, but also the interest of all countries in the region, this is a mutually beneficial business.
– Central Asia is for sure, a significant region. We see that it is crucial from Russia's constant interest in it, both geopolitically and in the sense of the business interests of corporations. But overall, what future does the region have? So far, the development of your neighbors, the post-Soviet countries of Central Asia, is rather uneven in economic terms. – We have a large reserve for growth, associated with a fairly high birth rate in the region. The near future of Central Asia is connected with the fact that we are updating personnel, which means that we need to invest more actively in young people, so that they provide states with a much more prosperous future and build new modern institutions. Less than thirty years ago, we literally rebuilt the entire market economy from scratch. Due to market reforms that were carried out at the very dawn of independence by Elbasy, Kazakhstan has been the economic leader in the region for a long time and still remains in this position.
At the same time, the economies of other countries in the region are equally important to investors. We see, for example, significant growth in Uzbekistan, which suggests that Central Asia continues to be an attractive destination for foreign investment. The region’s growth rates are among the highest, I think now
is a good time for such integration processes and creation of international platforms. – Prospects and current situation –there must be a bridge, which will allow ambitious plans to be realized. We know that you are actively working with countries in the region. But when it comes to the AIFC, in what areas do you plan to advance in the region, including the EAEU and Central Asia? And specifically, what kind of products do you offer to the region? – I think it is necessary to highlight several anchor products that are in demand in our region. This is, first of all, our jurisdiction, which guarantees the right of ownership and protection of the interests of investors and businessmen, this is our high-tech exchange, which is sufficiently secured by liquidity, as well as other various instruments, such as Islamic finance, that is actively growing, and green finance- I suppose these factors are the most interesting and important in connection with the movement towards decarbonization of the world economy, which will obviously be gaining rate.
We all need a stable and prosperous region, and more or less all the regional initiatives of the leadership of Kazakhstan from the moment of independence have been directed to it. We want to interact effectively with all our neighbors. This, in my opinion, is the only scenario in which the region can succeed. Our task as a regional hub is also to create trusting relationships between participants of the process, representing a wide variety of states.
For this, in fact, there is our separate jurisdiction with clear and independent rules of the game that can be used by citizens of China, Russia, Uzbekistan, and the countries of the European Union. Our institutional infrastructure is needed for financial flows.
– Russian entrepreneurs aim to operate in Kazakhstan and neighboring countries. This is related to both large corporations and smaller companies. The investment potential here is quite large. Nonetheless, all these things often abut on restrictions – infrastructure, regulatory, etc. Can the AIFC act as an instrument for entry to your markets for closer cooperation between Russian and Kazakhstani businesses, and may be even wider – regional business? – I think that the AIFC should come as an assembly point for the Kazakh-Russian business. Russian Federation is our key trading partner, and we can only deepen our cooperation.
– The Chinese Belt and Road Initiative, which you already mentioned, is perhaps the largest and most ambitious project of our time, but at the same time, it is rather ambiguous. We know that Kazakhstan, like other countries along the Belt and Road route, is very actively involved in it. What place does the AIFC take in the structure of this project? – As part of partnerships with leading Chinese financial institutions, the AIFC places special emphasis on creating, on its basis, ecosystems for all possible operations (including investment and financing) connected with Belt and Road Initiative projects. And this will ultimately help to diversify the country's economy by increasing the number of investment projects in various areas of industry, and expanding export of products to China. Today, Astana International Exchange has already created a special exchange sector of the market for attracting investments on the Belt and Road projects from international investors, primarily Chinese investors.
AIFC also collaborates with key financial institutions in China. Thus, the Construction Bank of China, the second largest asset in the world, and the China Development Bank became participants of the AIFC and opened their branches and representative offices here.
The Shanghai Stock Exchange, as well as the largest Silk Road Infrastructure Fund, have become strategic partners and shareholders of the Astana International Exchange.
The AIFC regulator has entered into agreements with the China Securities Regulatory Commission (CSRC) and the China Banking and Insurance Regulatory Commission (CBIRC), allowing Chinese professional participants to operate on the AIFC site.
The largest Chinese brokers CITIC, CICC, Shenwan Hongyuan also became trading members of the Astana International Exchange, allowing the issuers of the Exchange to attract capital of a large and diversified pool of investors
– What is AIFC like in the Kazakhstan’s domestic market? How do you assess purely Kazakhstani direction of your work? – We are now actively interacting with the domestic market. For example, we have registered a large fund of agriculture development, which will take a
Kairat Nematovich Kelimbetov К. Kelimbetov – Governor of the Astana International Financial Centre (AIFC).
He worked at the Supreme Economic Council under the President of the Republic of Kazakhstan, also he worked at the Administration of the President of the Republic of Kazakhstan, headed the Agency for Strategic Planning of the Republic of Kazakhstan, was the First Vice Minister of Finance of the Republic of Kazakhstan.
From 2002 to 2006 he worked as the Minister of Economy and Budget Planning of Kazakhstan. In 2006, he headed the Kazyna Sustainable Development Fund. In January 2008, he was appointed as a head of the Presidential Administration of the Republic of Kazakhstan.
From 2008 to 2011, he managed the Sovereign Wealth Fund Samruk-Kazyna, which combined all state assets. Since April 2011, he worked as the Minister of Economic Development and Trade of the Republic of Kazakhstan. In January 2012, he was appointed as a Deputy Prime Minister of the Republic of Kazakhstan, oversaw macroeconomics, budget policy, state asset management and the financial sector, tax and customs policy, and he was also the Chairman of the Council of the Eurasian Economic Commission representing the Republic of Kazakhstan. In October 2013, he was appointed as a chairman of the National Bank of the Republic of Kazakhstan.
Since December 2015 - Governor of the Astana International Financial Centre.
new approach to the sphere and sees itself as a tool for its complete reload.
Privatization of national companies of Samruk-Kazyna is realized through the Astana International Exchange, this simply increases the base of private investors. People are very professional about this, and I think that the upcoming placements of KazMunayGas, Kazakhtelecom and Air Astana will only consolidate our success in this regard.
– How do you see the AIFC if all the ideas that are laid down in it will be fully implemented? – We see the AIFC as an important financial centre in the world. And this, of course, in the near future will have a fruitful impact on the development of the financial centre, the economy of our country, and the economy of Central Asia.