ASTANA, JUNE 16 2017 (The Bulletin) — Through the Astana International Financial Centre (AIFC), Kazakhstan wants to create a regional centre of excellence that will lure companies to its windswept capital with a combination of tax breaks and guarantees on stability and the rule of law.
In an interview with The Bulletin, Baurzhan Bektemirov, managing director of the AIFC, said that setting up a legal system with English common law at its heart was key to one of Kazakh President Nursultan Nazarbayev’s pet projects.
“We have our own regulatory framework and authority. They are completely new. We are writing new bylaws and there will be more flexibility,” he said.
The plans are ambitious. AIFC and Nazarbayev University will take over the giant site currently being used by EXPO-2017 until mid-September. AIFC will have its own courts, legal and tax systems, all of which needed tweaks to the constitution to impose.
Part of the challenge of creating a financial centre in Kazakhstan, commentators have said, is persuading companies that it is now a reliable place to invest, that their rights will be protected and that corruption, an ailment that Kazakh companies and officials have found hard to shake off, is not going to derail their plans.
Under the plans, financial companies that move to the AIFC will be given tax breaks and should benefit from a stable, investor friendly, regime at the heart of Central Asia that can be used as a launchpad into Russia and East Asia.
“There will be no income tax for 50 years but this is not the main issue, it’s more about stability and how to do business,” Mr Bektemirov said.
At the centre of the AIFC are plans for a stock exchange and the development of a liquid capital market. It will be given a boost by the IPOs next year of state-owned Air Astana, Kazmunaigas and Kazatomprom which are committed to having their primary listings in Astana, although they are free to open a secondary listing on an international market.
“The idea is to conduct IPOs in Astana. This serves two things. It is cheaper and gives local investors better access. It’s weird that local investors have to go to London and pay all these fees to invest locally. Secondly it is about creating a local capital market,” Mr Bektemirov said.
Of course, Kazakhstan already has a stock exchange in Almaty – Kase. It was set up in the early 2000s but the market and investors weren’t ready.
Mr Bektemirov shrugged when asked about it. There are lesson to be learnt but this time it will be different.
“It wasn’t successful because of institutional problems. If you want to build new business, new companies, you need to build new institutions. You can’t rely on old institutions which have their owns problems, are rigid and are used to doing business in a certain way,” he said.
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(News report from Issue No. 333, published on June 19 2017)