Annual Report on the Activities of the Astana International Financial Centre

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Video presentation

Nursultan Nazarbayev

The First President of the Republic of Kazakhstan - Elbasy

          Astana International Financial Centre is a new page in the history of independent Kazakhstan. Its launch is a very significant step towards sustainable development of the economy.

I first suggested the idea of the AIFC in 2015, as a response to a new global challenge. Large-scale institutional and structural reforms are being implemented in Kazakhstan. They aim to make the country more competitive, and elevate it to a place among the top 30 developed countries in the world.

In the last few years we have become convinced of the need for efficient and sustainable institutions in the long-term perspective. We thoroughly studied the global experience of creating and operating various financial centres, including Dubai, Singapore and Hong Kong. The Kazakh model for the AIFC incorporates the best practices of those structures.

Kassym-Jomart Tokayev

The President of the Republic of Kazakhstan

         We consider the Astana International Financial Centre as a promising financial hub in Eurasia, which in the future will be able to fulfil the same role in the region as financial centres in Dubai, Hong Kong, Singapore, Switzerland or London. The AIFC has already become a centre of attraction of the largest international banks and investment companies. The Centre’s important activities will be assets management, fund management, implementation of new financial and green technologies.In a period of turbulence on the global capital and currency markets, the AIFC will become an “investment beacon” for EAEU countries, Central Asia, the Caucasus and Mongolia.

Askar Mamin

The Prime Minister of the Republic of Kazakhstan

          In 2019, the AIFC has become a self-sufficient, sustainable and stable institution that has built productive and effective relationships with government bodies and private sector within Kazakhstan, 7 as well as with leading global partners. We welcome the Centre’s successes, and we are ready to support its further development and look forward to progress in fulfilling its strategic objectives.

Kairat Kelimbetov

The Governor of the Astana International Financial Centre

          The AIFC was created within the framework of the Nation Plan “100 Concrete Steps” of 2015, the purpose of which is the formation of strong state institutions. Their mission on the planning horizon until 2050 and beyond is, first of all, to support the continuity of the course through the creation of an effective balancing system of checks and balances, as well as the decentralization of strategic decision-making.

These ideas were later confirmed and developed by Elbasy, the First President of the Republic of Kazakhstan Nursultan Nazarbayev during the constitutional reform of 2017, which redistributed the powers of the President to the Government and Parliament of Kazakhstan.

The AIFC’s establishment is the answer to many issues which are currently faced not only by Kazakhstan but also by the regional economy. The most important of these is economic diversification.

Kazakhstan - Financial Hub of the Region

Indicators

6%

The average annual growth rate of GDP

4.5%

Expected GDP indicators growth for 5 years

$ 88.9 bil.

the country's international reserves in 2018

28th place

in the World Bank's Ease of Doing Business

1st place

in the Central Asian region in terms of its FDI stock per capita and FDI stock to GDP ratio

$9300

GDP per capita

Key milestones of the AIFC establishment

AIFC advisory councils

AIFC legal advisory council

Tasks of the Advisory Council:

The AIFC Legal Consultative Council ensures that the AIFC’s legal framework complies with best international practices and standards by:

- determining the highest international standards for drafting the AIFC acts, rules and regulations, the scope and content of the AIFC law, the methodology of drafting, and strategic development of the applicable law of the AIFC; and

- approval of drafts of the AIFC Acts prior to their final adoption by the relevant AIFC bodies if requested by the AIFC bodies

AIFC advisory panel on legal regulatory matters

The objectives of the Advisory Panel are following:

- determining of the highest international standards for regulating the legal activities;

- providing strategic advice and expertise on legal regulatory matters;

- determination of the methodology and approaches for the development of the AIFC Act on regulating legal activity in the AIFC and other issues

AIFC academic council

The tasks of the Council are:

- promotion of highest international standards and organization of continuous professional development of the AIFC personnel;

- recommendations on development of academic and training programmes of the Bureau;

- recommendations on selection, admission, and exclusion of students of academic and training programmes;

- recommendations to the Bureau on selection of the AIFC academic and training scholarship winners;

- recommendation on pricing policy for academic and training programmes of the Bureau;

- recommendations on the action plan and general work scope of the Bureau;

- performance of other functions related to the continuous professional development of the Bureau and AIFC in accordance with the legal acts of the AIFC and the Statute.

AIFC advisory council on green finance

Tasks of the Council are:

- Consulting on policies, strategies and roadmaps for developing and promoting the AIFC as a regional green finance hub for Central Asia and Eastern Europe

- Providing expert opinion on the documents being developed by AIFC Authority and its bodies in the field of green Finance development

- Facilitating of the establishment and maintenance of relationships/partnerships with leading institutions in green finance and financial regulators for promotion of the green finance.

AIFC advisory council on Islamic finance

Tasks of the Council are:

- examination of the AIFC acts on Islamic finance for compliance with the best international practices and standards

- providing expert opinion on the documents developed by the AIFC bodies in the field of Islamic finance

- attracting leading international Islamic financial and other organisations to the AIFC

AIFC central Shari'ah advisory board

Tasks of the Board are:

- reviewing and approving relevant and applicable AIFC policies and guidelines related to Islamic finance business activities in the AIFC for Shari’ah compliance purposes

- approving Sukuk structures and their related documentation for the sovereign Sukuk (and/or other similar instruments issued by the government, regulatory or other relevant bodies)

- advising on other relevant Islamic finance business matters that are considered to be substantial for Shari’ah compliance purposes.

AIFC advisory council on FinTech

Tasks of the Council are:

- consulting on policies and, strategies and roadmaps for developing and promoting the AIFC as a regional/international Fintech Hub, basis for CIS and Central Asian countries to provide financial services of new generation of financial services

- providing expert opinion on regulatory documents in the field of financial technologies aimed at promoting innovations in financial services;

- facilitation of establishment and maintenance relationships/partnerships with leading global FinTech firms, VC firms, FinTech incubators and accelerators, FinTech regulators that promote FinTech;

AIFC consultative group on strategic and economic development

Tasks of the Consultative Group are:

- Promotion of the AIFC interests on global financial markets, at leading global forums, as well as on international financial organizations and institutions;

- Active consulting support in promoting the AIFC interests in key global financial markets;

- Establishing a network of business contacts with representatives of international financial institutions, global asset managers, central banks;

- Assistance in organizing the work of the AIFC bodies;

- Recommendations on the political and economic situation regarding the development of the AIFC, the new architecture of the international financial system and the role of the AIFC in it, new principles of regulation and opportunities of the AIFC, technological trends and changes in global financial markets.

AIFC audit committee

Tasks of the Committee are:

- discussion of the issue of financial control in the AIFC;

- making recommendations on financial control in the AIFC.

Strategic pillars

CAPITAL MARKET

ASSET MANAGEMENT

PRIVATE BANKING

FINANCIAL TECHNOLOGIES

ISLAMIC FINANCE

GREEN FINANCE

With rapid economic growth and highly attractive IPOs/ SPOs for investors in Central Asia and the EAEU, there is an increasing need for a liquid and efficient regional stock market. Therefore, the development of the capital market is one of the major and most significant priorities of the AIFC. The primary objective is to create a significant alternative to the banking system and to develop a liquid and well-balanced capital market with a broad range of financial instruments.

The Astana International Exchange is a regional platform for participants that attracts great financial inflows and connects the world’s leading market players in the East and West via its main partners – the Shanghai Stock Exchange, Nasdaq, Goldman Sachs, and Silk Road Fund. The AIX is a high-tech, innovative and efficient platform that provides services based on international standards, increases trading volume and revenue, as well as long- term expansion into new asset classes and revenue diversification.

The AIX’s main priority is to create a “familiar environment” for investors: a regulatory environment that is similar to other international jurisdictions, a technology platform with industry standard protocols that connects the AIX with the global investors and a group of brokers, which makes a link between domestic and foreign investors.

Nowadays, AIX has all the necessary components to function in full and conduct its first listings and IPOs, which AIX successfully demonstrated during the launch of trading for the national company Kazatomprom.

The development of the asset management market is integral to any successful financial centre, and the AIFC leverages its geographical position to provide international investors with access to markets in Central Asia. The AIFC opens opportunities for global and local private equity, as well as hedge funds and real estate funds to add diversity to their portfolios. Thus, localizing leading international asset management companies through the efficient use of Sovereign Funds along with strengthening internal expertise in the area, can

establish Nur-Sultan as the main regional centre for asset management and help boost the competitiveness of the Kazakh economy on the global market.

The AIFC has key advantages in acting as a regional centre for asset management. These include legislation based on common law principles, a favorable tax climate, independent currency regulation, access to Islamic and green finance, as well as economic and political stability.

The AIFC supports the development of the private banking sector along with the development of the asset management market. The Centre creates favourable opportunities for investments by wealthy individuals, and invites private equity and wealth management companies to open their offices in the AIFC. As private wealth management is globally experiencing a shift towards Asia, and as countries with developing economies are drawing more investments and fueling further wealth development, the AIFC aims at positioning Nur-Sultan as a main regional wealth management hub in Central Asia for the CIS, EAEU and other parts of Asia. The AIFC provides a favourable and reliable regulatory framework that is based on the positive experience of the world’s leading private equity management centres, that is leveraged on the positive global experience of the world’s leading wealth management centres such as Switzerland, Singapore, Luxembourg and the UAE. The extensive range of products and services (investment & portfolio consulting, tax & investment planning, asset allocation) are offered in accordance with the best modern practices in private capital management, via such structures as representatives, branches, affiliated companies, services for opening and maintaining accounts for local players.

With its modern infrastructure, flexible regulations, easy communication environment and legal transparency, the AIFC is well positioned to attract tech companies and become a regional FinTech hub with flexible regulation. The introduction and development of the relatively new FinTech aspect allows to reduce the cost of traditional financial services, facilitate an expanded integration with global markets and accelerate the development of the local financial system. Considering the transformations of the global financial system that uses innovative technologies, the AIFC has launched a number of initiatives that will help the region to seize the opportunities offered by FinTech. A legal regime has been launched by the AIFC to test new FinTech products in a light Regulatory Sandbox regime, along with a specialised regulatory environment (the FinTech Lab), which allows companies to offer their innovative financial services in a safe environment, without the full burden of regulatory requirements. The main objectives of the Regulatory Sandbox are to promote competition by removing unnecessary regulatory barriers to bring financial innovations to the market, ensure appropriate consumer protection safeguards, reduce potential risks in financial innovations by adapting existing risks, and to build a more efficient and stronger regulatory framework. Currently, the Astana Financial Services Authority has adopted the regulatory framework of the AIFC in the sphere of private electronic currencies (cryptocurrencies) and private placement of securities. However, in the near future it plans to introduce amendments into the AIFC Acts on the regulation of crowdfunding activities, which is aimed at providing access to alternative forms of financing for small and medium-sized businesses.

At the same time, the goals of the FinTech Lab are to simplify access to investments, create a legislative basis for new products/business models, eliminate ineffective legal norms, and ensure appropriate measures to protect consumers and investors. The FinTech Lab allows companies with licenses from foreign jurisdictions to test regional markets with a minimum amount of resources through step-by-step compliance with the AIFC regulatory requirements, and to test new unregulated financial services

Kazakhstan is an attractive platform for the development of Islamic finance in the region. The AIFC plans to become a regional Islamic finance hub for the countries of Central Asia and the CIS by providing a special infrastructure, legal and tax regime, as well as opportunities for professional development.

Working closely with the Asian Development Bank (ADB), the AIFC has created a favourable legal and regulatory environment for Islamic finance and banking, takaful and the Islamic capital market. For the further development of Islamic finance legislation, representatives of the AIFC joined the Technical Committee of the Islamic Financial Services Board (IFSB), as well as working groups on the development of IFSB standards. With the technical assistance of the Islamic Development Bank (IsDB), the AIFC is working on a Master Plan (Roadmap) of the development of Islamic finance in Kazakhstan.

To promote the AIFC as a regional hub of Islamic finance, the Advisory Council on Islamic Finance (ACIF) and the Central Shari’ah Advisory Board under the AIFC have been established. Their members are the best international experts in the field of Islamic finance. The AIFC is forming a fully-fledged market for Islamic finance. It has created the conditions for Islamic securities to be issued on the AIX: the issuance of corporate and sovereign Islamic securities (sukuk) are planned. The AIFC registered the first companies operating in the field of Islamic finance, including Islamic Bank, the Waqf Fund Investment Fund, Islamic FinTech organisations, as well as legal and consulting companies.

The AIFC facilitates the development of green finance by providing the necessary conditions and infrastructure, stimulating the transition to a green economy and sustainable development. The AIFC has developed a legislative base for green finance, including the Concept of the Green Financial System for Kazakhstan and the AIFC Strategy on leadership in green finance until 2025,  which reflects the main institutional development stages of green finance at the AIFC.  An important step was the development of the Rules for issuing green bonds on the AIX, which are based on the ICMA Green Bonds Principles and the Climate Bonds Initiative systematics, defining the criteria for green projects that can be financed through the issuance of green bonds, as well as the issue procedure itself. At the same time, the sectors of the economy in which the green projects described in these rules can be implemented are correlated with the provisions of the Concept on the transition of the Republic of Kazakhstan to a green economy.  An example of the successful implementation of a green economy in countries with energy reserves similar to Kazakhstan is Norway, which is actively developing a green economy and is switching to clean technologies. In the long-term, the development of a sustainable economy is an economically viable action.

Nur-Sultan – Destination For Business

SMART CITY

The project Smart Astana is created for sustainable development, improving the quality of life of residents and guests of the capital of Kazakhstan by modernizing city infrastructure, integrating the technologies into the city’s development, increasing public safety, as well as creating a platform for citizens and the business community to exchange ideas and knowledge. For many years the capital of Kazakhstan has been a venue for world class political, sporting and cultural events. With the development of the AIFC, Nur-Sultan is undoubtedly becoming an important element of the global financial system.

The harmonious development will allow the capital to become a truly global, smart, innovative model for the development of many European cities, based on six elements: smart economy, smart management, smart life, smart mobility, smart people and smart environment. The synergy of these characteristics defines the concept of Smart Astana, contributing to energy savings, lower utility costs, fewer traffic accidents, etc.

GREEN FINANCE HUB

Kazakhstan has a great opportunity to orient its financial system towards low-carbon and sustainable development, also taking into account the process of mobilisation and reorientation of the world’s economy

towards clean technology. The AIFC pays special attention to supporting such projects in the capital, which are based on the core principles of green economy: increasing and managing the efficiency of resources usage (water, land, biological, etc.), improving current infrastructure and constructing a new one, improving the population’s well- being and the health of the environment, enhancement of national security and of water security in particular. Mindful of the importance of such projects, Nur-Sultan’s municipality is developing a strategy for the city’s low- carbon development until 2030. Also, in March 2019, the AIFC joined the Green Principles of the Belt and Road Initiative, which demonstrates the Centre’s commitment to the principles of green financing.

TAX REGIME IN THE AIFC

In accordance with the Constitutional Statute of the Republic of Kazakhstan “On the Astana International Financial Centre,” the AIFC participants are exempt until 2066 from corporate income tax on income received from providing the following financial services at the AIFC:

1. Islamic banking services;

2. Reinsurance and insurance brokerage services;

3. Investment management services for assets of

investment funds, accounting and safekeeping services for investment funds, as well as services related to issuing, offering, trading, purchase and redemption of securities of investment funds;

4. Brokerage, and (or) dealer, underwriting services;

5. Any other financial services prescribed by AIFC Acts

Until 2066, AIFC participants are exempt from corporate income tax on income received from legal, audit, accounting and consulting services provided to the AIFC Bodies as well as to the AIFC participants that provide the above-mentioned financial services in the AIFC.

The AIFC bodies and AIFC participants that provide financial services and legal audit, accounting and consulting services are exempt from property tax and land tax for facilities located in the AIFC.

Until 2066, foreign nationals who are employees of an AIFC participant that provides financial services and legal, audit, accounting and consulting services or of an AIFC Body, are exempt from personal income tax on income received under their employment contracts with the AIFC Body or AIFC Participant.

Until 2066, natural and legal persons are exempt from individual and corporate income tax on income received from the following sources:

1. Profits from the sale of securities listed, on the day of their sale, on the official list of the Stock Exchange;

2. Profits from the sale of shares or stakes in the capital of the AIFC participants that are legal persons registered under the AIFC Acting Law;

3. Dividends and interest from securities listed, on the day of their distribution, on the official list of the Stock Exchange;

4. Dividends from shares or stakes in the capital of the AIFC participants that are legal persons registered under the AIFC Acting Law.

ONE-STOP-SHOP PRINCIPLE

In order to facilitate a business, set it up within the AIFC’s jurisdiction and attract the best international workforce, the AIFC Expat Centre in Nur-Sultan provides a wide range of government and non-government services based on the one-stop-shop principle. Foreign nationals coming to the capital city can receive efficient centralized access to visa and migration related services, tax-revenue services, Government for Citizens State Corporation (GCC) services, call-centre services, as well as assistance

in securing accommodation, educational facilities, etc. The authorized official of the government and non- government organisations are physically present on the AEC’s site.

AIR CONNECTIVITY

One of the key factors in the development of the AIFC is the capital’s connectivity by air. Nur-Sultan is directly connected with many other global financial centres, including Frankfurt, London, Paris, Seoul, Bangkok, Beijing, Istanbul, New Delhi and Dubai.

By 2025 Nur-Sultan aims to open direct routes to more than 50 financial centres, including New York, Shanghai, Hong Kong, Singapore, Tokyo, Amsterdam and Zurich.

Nur-Sultan has the potential to become one of the main transit hubs for international air travel in the region due to its advantageous geographical location, air liberalisation policy, favourable visa regime, and modern airport facilities.

Nur-Sultan has already acquired the status of a political, cultural and business centre, which attracts a large amount of investment in construction and infrastructure projects. Nur-Sultan is a venue for important world- class events. The city is also number one choice for the regional location of offices of international corporations, commercial organisations and financial institutions. In addition, the city’s geographical location in the heart of Eurasia gives Nur-Sultan significant advantages to become an important transportation hub between Europe and Asia.

Kazakhstan’s civil aviation policy is aimed at achieving a greater degree of airspace liberalisation. State authorities are constantly working to develop and strengthen intergovernmental agreements on air traffic.

Favourable visa conditions include exemptions from visa requirements for visits up to 30 calendar days for citizens of OECD countries, the EU, Malaysia, Monaco, UAE and Singapore (45 countries in total). A 72-hour visa- free regime has been introduced for Chinese and Indian citizens transiting to third countries via the international airports of Nur-Sultan and Almaty.

GLOBAL FINANCIAL CENTRES INDEX

In the Global Financial Centres Index 2019 (GFCI 25) the capital of Kazakhstan is in 51st place out of 102, climbing 37 positions over the past year, since the moment of the AIFC’s official launch. This is significant progress in the development of Nur-Sultan city as a financial centre. According to this ranking, Nur-Sultan is the leading financial centre of the entire region of Eastern Europe and Central Asia being ahead of Istanbul, Prague, Budapest, Moscow and Baku.

The ranking explores financial centres around the world by making an analysis of areas such as competitiveness of the business environment, human capital, infrastructure, financial sector development, reputation, as well as the level of diversity, specialty and accessibility.

AIFC PROPERTY

The territory of the AIFC spans 1,632 hectares, which are situated on the left bank (including the EXPO) and part of the right bank of Nur-Sultan city, which allows companies to register as AIFC participants using the city’s extensive and developed transport, logistics and administrative infrastructure.

The EXPO, which currently houses the AIFC bodies and their organisations, represents an architectural design of

unique quality and is specifically designed to provide the high-tech innovation infrastructure of the AIFC.

The EXPO’s modern, high-class office space is a kind of financial and technological hub in the centre of the AIFC, with a single atmosphere for investors and accommodation of the largest financial institutions in the world, as well as technological development objects. At the same time, the EXPO site is becoming the basis for creating an advanced financial and technological hub in the very heart of the AIFC, which suits for placing major financial institutions as well as objects of technological development.

AIFC projects

PRIVATISATION PROGRAMME

The privatization program is being implemented within the framework of the task set by Elbasy, the First President of the Republic of Kazakhstan Nursultan Nazarbayev to reduce the government’s share in the country’s economy to 15% of GDP, as recommended by the OECD. The AIX is defined as the main platform for the privatization of national companies. Thus, in November 2018, an initial public offer of shares of the world’s largest uranium producer, the national company Kazatomprom, took place on the Astana International Exchange

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AIFC’S ROLE IN THE BELT AND ROAD INITIATIVE

The Belt and Road Initiative (BRI), an unprecedented strategy aimed at reviving the ancient Silk Road, plays a great role in the development of the whole Central Asia.

AIFC has managed to build a strong relationship with leading Chinese institutions, international development banks and major financiers of Belt and Road investments, such as the partnership with Shanghai Stock Exchange, Silk Road Fund, China Development Bank, China Construction Bank to name a few

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GLOBAL MARKETS

In partnership with the European Bank for Reconstruction and Development, the AIFC has launched a project to develop the country’s capital market, which will contribute to creating liquidity during large-scale privatisation. As a result, the Kazakh market will not only become liquid, but it will also be able to raise its status in the global MSCI index to the level of Emerging Markets.

The project also aims to create an optimal liquid infrastructure on the exchange market.

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E-RESIDENCY

The main objective of the AIFC’s e-Residency project is to create best possible climate for establishing a business in the AIFC and Kazakhstan. The launch of this project will have a positive impact on the investment climate in the country, the global image of the AIFC and Kazakhstan, and will allow potential participants to spend as little time as possible in Kazakhstan while the business is being set up. During 2018 the AIFC launched a digital portal to provide AIFC participants with services for remote authorisation and registration of legal entities on the territory of the AIFC.

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EJUSTICE

eJustice is an online portal that enables parties to file cases at the AIFC Court and IAC electronically from anywhere around the world without having to be physically present in Nur-Sultan. The portal aims to provide the legal and business communities with immediate and convenient access to the AIFC Court and IAC.

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FINANCIAL SUPERMARKET

At present, the AIFC is implementing a project to create a digital platform for a financial supermarket, the concept of which was developed jointly with the international consulting company Accenture. The new platform will be one of the important elements of technological modernisation of the economy of Kazakhstan, to create new promising areas in the economy and finance, based on modern digital technologies.

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ACCELERATION PROGRAMME FOR ISSUING GREEN BONDS

The AIFC Green Finance Centre has launched the Acceleration programme for issuing green bonds on the Astana International Exchange.

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AIFC on the International Arena

The AIFC is constantly working to expand its presence in the international arena. Within the regulatory framework the AIFC acts in accordance with the standards set by global organizations. In this regard, the AFSA has become a member of the International Organization of Securities Commissions (IOSCO), International Association of Insurance Supervisors (IAIS), the Group of Banking Supervisors from Central and Eastern Europe (BSCEE), which is a regional group of the Basel Committee on Banking Supervision (BCBS), the Islamic Financial Services Board (IFSB) and Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). Membership of these organizations contributes to the adoption of international standards to regulate capital markets, banking, insurance and Islamic finance. Also, the AFSA joined the R3 Consortium and the Corporate Registers Forum (CRF).

The AIFC cooperates with the Organization for Economic Co-operation and Development (OECD) and seeks to create a regulatory framework of financial services that meets the highest standards of transparency and information exchange for tax purposes.

Within the framework of international cooperation, the AIFC is a part of the Global Financial Innovation Network (GFIN) initiative, which is an association of 35 global financial regulators and organizations including the UK Financial Supervision Authority, the International Monetary Fund, the World Bank Group.

 

Participants

Kazakhstan:

107
Full list

Kazakhstan:

107
Full list

Russia:

12
Full list

Great Britain:

8
Full list

Finland:

6
Full list

China:

5
Full list

Hong Kong:

4
Full list

USA:

3
Full list

Ukraine:

2
Full list

UAE:

2
Full list

Netherlands:

2
Full list

Singapore:

2
Full list

India:

1
Full list

Yemen:

1
Full list

Malaysia:

1
Full list

Estonia:

1
Full list

Latvia:

1
Full list

Czech:

1
Full list

Italy:

1
Full list

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