AIFC: main attractor of investment in Kazakhstan
In the State-of-the-nation-Address delivered on September 1 this year President of Kazakhstan Kassym-Jomart Tokayev stated that it is necessary to effectively use the potential of the Astana International Financial Centre to further develop the economy of the country. This is especially important in the era of coronavirus and economic slowdown. Read more about the activities of the AIFC, its interim results and forecasts in the review by the Strategy2050.kz correspondent.
According to the Head of State, this platform should become a key tool for attracting direct and portfolio investments.
“The Government should continue to support the activities of the AIFC, which, in essence, has acquired constitutional status. The AIFC could become a platform for the development of the latest digital technologies together with Nazarbayev University”, the President said.
Kazakhstan's gross inflow of FDI amounted to 3.6 billion US dollars in 2020. The largest investors are the Netherlands ($988.3 mln), USA ($744.9 mln) and Russia ($379.9 mln).
The Astana International Financial Centre is one of Kazakhstan's key investment attractors. It is the unique institution for the EAEU and Central Asia, established to support the inflow of investment and the development of the domestic financial market. The AIFC has a special legal regime based on the principle elements of English law and an independent regulated environment based on the best international standards, as well as a wide range of services at the AIFC Exchange (AIX).
Over the years of its operation, the AIFC has already shown its effectiveness as a platform for attracting investment. More than 500 companies from 42 world countries, including the United Kingdom, the USA, China, Russia, Italy, Finland, South Korea, Singapore, Malaysia and many others, have registered on its base. The Centre's participants are offered a wide range of financial instruments and mechanisms for transparent and efficient conclusion of transactions. By July 2020, participating companies had already invested about 444 million US dollars in the development of financial technologies, construction, agriculture and manufacturing. In addition, there are intentions to invest about 3.5 billion US dollars in the economy of Kazakhstan.
The AIFC completes many tasks. For the first time in Kazakhstan the Centre has introduced financial instruments previously unused: yuan-denominated bonds issued, cross-listing of sukuk - Islamic securities - was carried out. Damu Fund has listed "green" bonds on the AIX, as well. Their placement was the first listing of securities that comply with the rules of "green" bonds in Kazakhstan. In general, in recent years, the AIFC stock exchange has attracted 2.7 billion US dollars of portfolio investment. Of these, investment in bonds amounted to over 2.4 billion US dollars, in shares - 220 million US dollars. The capitalization of companies that have listed their securities on the AIX stock exchange has almost reached 15 billion US dollars.
The measures taken are aimed at developing local business and investment projects, creating workplaces, which is especially important amidst the pandemic. The AIFC is becoming the unique meeting place for shareholders' interests and projects in Kazakhstan and in the region as a whole.
In addition, against the backdrop of the “coronacrisis”, the international financial centre continues to create infrastructure to support business. AIX has launched the Regional Equity Market Segment (REMS) aimed at providing Kazakhstan and Central Asian midsize companies with better access to equity financing. Now, not only large but also medium-sized companies will be able to issue shares on the AIX Exchange. For them, the requirements for the placement of securities have been relaxed, which will allow them to receive funds on more favorable terms than in banks. This type of financing will become more accessible, especially considering that the second-tier banks of Kazakhstan have tightened the terms of business lending.
According to forecast data of the Ministry of National Economy, the real growth of the country's GDP in 2021 will be 2.8%, in 2025 - 4.6%. Positive growth is expected in all basic industries. This year, the rating agencies Moody’s and FitchRatings have confirmed the rating of Kazakhstan at the level of investment reliability.
Thus, in the crisis conditions, the AIFC will play a key role in the economic revitalization in Kazakhstan.