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Kazakhstan seeks to learn Dubai lessons

Astana International Finance Centre a ‘copy-paste’of DIFC, governor says

Image Credit: WAM/Gulf News Archives
The UAE pavilion at Expo 2017 Astana. The governor of the AIFC said using the former Expo site for the AIFC would enable a clustering approach to financial innovation.
Gulf News

DUBAI

Kazakhstan’s bid to become a regional finance centre and fintech hub for Central Asia is deeply influenced by Dubai, said Astana International Finance Centre (AIFC) governor Kairat Kelimbetov.

The influence is so great that Kelimbotov referred to Astana’s model as a “copy-paste” of Dubai International Finance Centre (DIFC).

Kelimbetov, in an interview during his latest visit to DIFC, said Dubai’s experience had taught AIFC what soft infrastructure was required. “What we’ve learnt is just how to implement the rules and principles of English common law in a country where the traditional law is not common law. Here [Dubai] is Sharia, in Kazakhstan we have a more continental type of law, close to the post-Soviet experience.”

English common law is favoured for contracts and dispute resolution by the international business community. AIFC sees its role, in part, as a gateway to Central Asia for international investors and companies. “We don’t have any kind of choice. To bring investors we have to bring them a familiar law and familiar system.

“In this sense we have learnt from Dubai. We’ve copy-pasted even their structures, so we have dispute resolution authorities, regulation authorities, we have a stock exchange which we created jointly with Nasdaq and the Shanghai stock exchange.”

As well as serving as Astana’s financial district, AIFC would serve as a national and international centre, the latter focusing on the Central Asian region, the Eurasian Economic Union (EAEU) and China’s Belt and Road Initiative, popularly known as the New Silk Road.

“This is a really commercially viable idea of how to use this place. It’s not an artificial fulfilling of the territory, it’s very natural.”

Kelimbotov doesn’t expect Astana will step straight into the big leagues as a global, or even a regional, hub. There are, he points out, 77 financial centres around the world, and it has taken Dubai and Singapore more than a decade to achieve their current status.

Nevertheless, he believes Kazakhstan has certain advantages that will allow it to achieve its ambition. Like Dubai, it is a historic trading hub, its position on the ancient Silk Road putting it in a strategic location between East and West. He acknowledged that Astana had preliminary work to do, including the development of capital markets, asset management and private banking, but the investment boom brought by the Belt and Road Initiative would spur such development and more.

“Who could imagine that Kenya or Rwanda would be the fintech hubs for Eastern Africa, or in broader terms the entirety of Africa or the Middle East and Africa. Nobody would have believed this five years ago.”

While he accepted there were particular circumstances leading to those nations’ fintech development — such as rapid economic growth and use of social media in Rwanda, the development of SMS-based banking services in Kenya through necessity, he noted, “Philosophically, you can use circumstances as a reason not do something, or as a reason to do something.”

Building on the focus of the Expo 2107 Astana — its theme was future energy — he saw green finance, particularly its interface with fintech, as an area AIFC could develop leading expertise.

“Some people call these disruptive technologies. We understand that these aren’t disruptive technologies any more, just new technologies replacing old technologies. This is irreversible and unavoidable … Here in Kazakhstan we don’t have a legacy which can create obstacles for us.

“If you want to create fintech solutions in Europe, you have a lot of different regulation requirements, you have 200 years of investment in the infrastructure which is now not easy to replace, because people have already invested heavily and why should the change?”

This extended even into the regulatory framework, he said. The lack of long legacy would enable AIFC to act as a sandbox for testing new regulations.

“In Kazakhstan, in terms of fintech or even financial inclusion, we have lot of dimensions that we are just creating from scratch or we can easily replace. It’s much cheaper and more convenient to people, it’s more reliable and backed by future trends.”

He added, “We shouldn’t lose this opportunity.”

Using the former Expo site for the AIFC would enable a clustering approach to financial innovation; new ideas could emerge from regulators, financial professionals and academics socialising at lunch or able to quickly walk to each others’ offices.

“It will take time,” he said. “The master plan is for 20 years, but to think about what will happen in 20 years is very difficult. Definitely there will be some changes to this plan.

“We expect that for the first five, seven years, we will struggle for the regional financial services, in terms of Central Asia and even the Belt and Road Initiative. When we succeed in this stage I think we can be more ambitious in terms of being top Asian financial centre. This is our 20-year goal.”

He used a finger to draw an exponential curve in the air. “We expect growth like this. It’s very important to do everything relevant and prudent in the very beginning, because we consider ourself a new DNA of the Kazakh economy. This is very important — if the new DNA is wrong then it will be very difficult to change it.

“That’s why we have studied the experience of Dubai, Singapore, Hong Kong, London, New York. We are trying to avoid mistakes and to bring their achievements. It is a very responsible time.”

 

The legacy of Expo 2017 Astana

When Astana placed its bid to host its interim Expo, the first question asked by the Bureau International des Expositions (BIE) was what would happen to the site after the Expo ended, AIFC chief Kairat Kelimbetov said.

AIFC’s headquarters will occupy part of the former Expo site. The post-Expo use of the site (what developers call the legacy use) as a finance centre formed part of the city’s initial plans for hosting the Expo.

“From the very beginning, nowadays everyone who wants to win and host an Expo in their country first of all has to think about what they’re going to do with it space after,” he said. “It’s a key thing.”

He added, “People are worried about the impact, about the efficiency of using public monies. What to do? That’s why in Kazakhstan from the very beginning we’ve been very open about saying that it will be a new financial services hub.”

Astana’s Expo site was designed with a central, spherical building hosting Kazakhstan’s pavilion and a Museum of the Future. This will remain as a museum, open to the public.

The surrounding blocks, which housed national pavilions, will be converted into offices. One smaller unit will become an international IT start-up hub, another a centre for green technologies. One of the four larger blocks will become an exhibition conference centre. Another of the larger pavilions will become an employment training centre.

AIFC will occupy the two remaining large blocks, each around 40,000 square metres. One will be converted to administrative offices for AIFC staff and related organisations. The second would house banks and other private organisations.

 

Profile: Kairat Nematovich Kelimbetov

Born: 1969, Almaty, Kazakhstan

Education: Moscow State University, Georgetown University (US)

Career:

To 2002 Member of Kazakhstan Supreme Economic Council

2002-2006: Kazakhstan Minister of Economy and Budget Planning

2006: CEO of Kazyna Sustainable Development Fund

2008: Appointed Head of Administration of the President of the Republic of Kazakhstan

2008-2011: CEO of Kazakhstan sovereign wealth fund Samruk-Kazyna JSC

2011: Kazakhstan Minister of Economic Development and Trade

2012: Kazakhstan Deputy Prime Minister

2013: Appointed Chairman of the National Bank of Kazakhstan

2015: Appointed Governor of Astana International Finance Centre

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