20 August 2019 14:43
AIFC new bill to attract more investors

The Astana International Financial Center largely centers on facilitating to the attraction of investments in the Kazakh economy and developing the securities market and its integration with the international capital markets.

The AIFC’s legislation was formalized by adopting over 70 laws and rules of general application and financial regulation. As of today, the complete infrastructure of the AIFC is created as well as all the necessary bodies and organizations in keep with the international standards. Among them: the AIFC Management Council, the AIFC Administration, the Astana Financial Services Authority, the AIFC Court, the International Arbitrage Center and the AIFC Stock Exchange. The AIFC Court rules are based on the principles of English Law, giving comfortable legal conditions for foreign investors and ensuring investment security.

“The AIFC Court is based on the higher standards to resolve civil and commercial disputes and all the nine justices operating in the AIFC are seasoned and renowned justices of international common law”, Kairat Kelimbetov states.

The International Arbitrage Center is an independent expeditious alternative to judicial proceedings through arbitration and mediation. It consists of 30 experienced and independent international arbitrators and mediators. The AIFC’s law might also be applied by actors not affiliated with the AIFC.

“This year has seen the AIFC’s law being chosen as the applicable law of more than 600 contracts. The AIFC Court recently made its first decision on the commercial dispute, proving that the AIFC’s jurisdiction is a world-class ready-to-use product”, the AIFC Governor said.

The AIFC has its financial regulator, sitting on the international organizations to introduce the international standards in regulating capital markets and banking, insurance and Islamic finances. It is also a member of the International Organization of Securities Commissions (IOSCO) and the Basel Committee on Banking Supervision (BCBS).

“As of today, the number of the registered enterprises in the AIFC has risen to 235 companies from 26 countries, including the USA, the UK, Switzerland, China, Russia and others as well as large financial institutions”, Kelimbetov said, vowing to increase that number to 500 by the end of 2020.

The year 2018 marked the AIFC’s official launch, presenting it in the international arena, the AIFC Stock Exchange was given a start, with world leaders in the financial industry such as Shanghai Stock Exchange, NASDAQ, the Silk Road Fund, Golden Sachs becoming strategic partners and shareholders of the Exchange.

November last year saw KazAtomProm National Company successfully going public, with 49 foreign, 17 domestic institutional investors and Kazakh citizens acquiring the Company’s shares for a total amount of 168 billion tenge on the AIFC and London Stock Exchanges.

Two tranches of Eurobonds of the Finance Ministry for over 1 billion dollars were issued placed on the AIX and LSE.

Coupon bond issues by KazTeleCom though private placement on the AIFC Stock Exchange are totaled at 100 billion tenge.

February this year the AIFC Stock Exchange has gained the recognized stock exchange status by the UK HM Revenue and Customs.

April 2019 has seen Russia’s one of the largest precious metals mining companies Polymetal International plc becoming the first foreign issuer, with the Company’s securities for 17 million US dollars acquired during the first trading day.

August this year ITI Funds has been listed on the Astana Stock Exchange, providing access to Russian Eurobonds.

“Share capital has totaled at approximately 70 million US dollars in less than one year since the AIFC Stock Exchange’s launch. In the first half-year of 2019, total capitalization of the AIFC Stock Exchange’s market has equaled over 1 billion US dollars”, he outlined.

In an effort to facilitate to the transition to a green economy and sustainable development, the AIFC promotes development of green finances as the Concept and Strategy to develop the instruments and principles of green financing was adopted designed with the EBDR and international experts.

The AIFC also works on issuing green bonds for infrastructural, innovational and environmental projects.

The AIFC was placed 51st out of 100 in the Global Financial Centres Index (GFCI).

“In a bid to ensure the AIFC’s international accessibility, air flights to Tokyo were recently launched, and there plans to open air flights to the largest financial centers of the world – Shanghai, New York and Singapore”, the AIFC Governor stated.

To further develop the Astana International Financial Center, the Finance Ministry and the AIFC has come up with a bill. The bill touches upon two aspects, first, investment tax residence, and second, the norms specifying the work of the Astana International Financial Center, according to Berik Sholpankulov, the First Kazakh Finance Vice Minister.

“There are over 80 investment tax residence programs worldwide, envisaging two residence programs. The programs carried out in such countries as the USA, Canada, Spain, Latvia and Greece, where a residence permit is given in exchange for investments and the programs that imply the obtaining of investment visas and tax residence of a country. These countries include Italy, Switzerland, Cyprus and the UK”, the First Finance Vice Minister said.

Kazakhstan leans towards the second type of the investment tax residence program. Thus, the bill provides for introducing such notions as an “investment resident” and an “investment tax residence program”.

“An investment tax residence program is approved by an act of the AIFC and will be agreed with government bodies, including the Ministries of National Economy, Internal and Foreign Affairs and the National Security Committee”, Sholpankulov stated.

The program will outline amounts and instruments of investment, the procedures for obtaining investment tax residence. The program’s main concept is attracting investments in return for obtaining multiple re-entry visas by the investor and his family members.

Kazakh Prime Minister Askar Mamin said the new bill will extend the AIFC’s jurisdiction in investments’ attraction and protection as the Kazakh Government officials unanimously approve the draft amendments to the Constitutional Law on the AIFC.

The bill also states that the AIFC bodies will be free to adopt acts that regulate labour relations and procurement procedures.

“Under the National Plan – 100 concrete steps, in 2015 a special Constitutional Law on the AIFC was passed, laying out its objectives, tasks and principles. The amendments to the Constitutional Law presented today will allow for rapid establishment and development of the AIFC as the country’s core financial platform and use of its jurisdiction to attract and protect investments”, Mamin stated.

It should be noted that the idea of the AIFC was announced by Nursultan Nazarbayev in May 2015. December 2015 saw the adoption of the constitutional law on the AIFC and its administration’s establishment. In late 2016 the AIFC received the budget and 2017 saw the constitutional amendments formalizing the Center’s status. Since July 5 2018 all the bodies and organizations of the AIFC became operational. The AIFC’s exchange stock market began its first trading in November 2018 which marked the participation of First Kazakh President Nursultan Nazarbayev. July 2019 Nursultan Nazarbayev heard an annual report prepared by the AIFC Management Council during his visit to the Center.

Adlet Seilkhanov