Kazakhstan: will Astana’s financial gamble pay off?
ASTANA (TCA) — The prospects of the recently inaugurated Astana International Financial Center may be uncertain, observers say, and it is yet to be seen whether this ambitious project will succeed in becoming Central Asia’s main financial hub. We are republishing this article on the issue, written by Joanna Lillis, originally published by Eurasianet: If the gamble behind the Astana International Financial Center pays off, Kazakhstan could be propelled into the international financial services premier league. The main champion of the AIFC, President Nursultan Nazarbayev, rung a confident note at its raucous official inauguration on July 5. “Astana should become the region’s main financial hub, and in the long term join the ranks of leading Asian financial centers,” he enthused, banging an opening gong, a nod to the New York Stock Exchange’s celebrated bell, as he was showered in glittery ticker tape. The AIFC has set out several lures to tempt companies into relocating there – among them are 50-year tax breaks and the creation of a legal framework modeled on English common law. The aspiration is for the center to draw $40 billion in finance by 2025 and in the process rebrand oil-rich Kazakhstan as a financial hotspot and help wean it off its addiction to commodity revenues. So far, so good. But with memories of the launch party now fading, is it time for a reality check? Targeting areas ranging from capital markets, asset management and fintech to Islamic and green finance, the AIFC may have a bright future. At the moment, however, it is very much a work in progress. The stock exchange is not yet trading. Its facilities at Astana’s EXPO-2017 site, near a glass globe that foreign visitors dubbed the Death Star, much to Astana’s chagrin, are not yet finished. And for all the fanfare, the flagship financial hub has registered only 49 companies, few of which have brand recognition. The center has potential, analysts say, but there are challenges ahead. “AIFC is a state project and hence relies heavily on state support,” Kassymkhan Kapparov, director of Almaty’s Bureau for Economic Research of Kazakhstan, told Eurasianet. “That is a major strength and the biggest weakness at the same time.” The government has committed investments worth $180 million over the next three years, so the AIFC’s success “depends largely on the ability of the state budget to continue to fund its activities and the ability of the government to sustain macroeconomic stability over the long term,” Kapparov said. From a Kazakh perspective, oil prices have reverted to a healthy high level, but a dip could spell trouble. Another question is whether investment will flow in as the government expects. “The AIFC will struggle to overcome low international recognition and it is unclear if it is meeting existing demand for any of the areas it is targeting,” said Maximilien Lambertson of the London-based Economist Intelligence Unit. “It is one thing to base the AIFC on the successful models of Dubai and Singapore, but another to know if...
