Kazakhstan’s long-time president Nursultan Nazarbayev’s strategic plan is for the country to become one of the top 30 developed nations in the world by 2050. In line with this, and in what was one of the more high-profile economic developments in Kazakhstan’s recent history, the Astana International Financial Centre (AIFC) was launched in July 2018 following years of preparation and roadshows. The hope is its establishment will convert Astana into a financial hub for Central Asia and aid the development of the country’s financial services market.
In the capital markets area, the government has been encouraging IPOs to increase liquidity in the market. There are plans to float at least seven state-owned companies between 2018 and 2020, in the form of dual listings run on the London Stock Exchange and the newly established Astana International Exchange (AIX). The world’s largest uranium producer, Kazatomprom, and national carrier Air Astana are among those expected to launch first. Oil and gas company, KazMunayGas, and national railway operator Kazakhstan Temir Zholy are other potential issuers in the IPO pipeline.
The AIX is an attempt to entice foreign investment to Kazakhstan. Nazarbayev’s earlier attempt to launch a stock market, the Almaty-based Kazakhstan Stock Exchange (KASE) in 1993, largely failed to attract liquidity but the hope is the government will have learned in the process. The exchange hopes to encourage listings with promises of transparency through oversight by international regulators, lower fees than established hubs, and 50-year tax breaks. The KASE and AIX will operate in parallel, splitting the nation’s liquidity pool between two stock exchanges.
Despite these recent positive developments, the country’s economy is still recovering from the aftershocks of the economic crisis and has been impacted by recent geo-political developments too. Renewed international sanctions against Russia have prompted the government and the National Bank of Kazakhstan to consider regulatory measures to limit any related negative impact. There is concern the devaluation of the Russian rouble will result in the fall of the Kazakh tenge and inflation. Mining companies including Polymetal International and the state-run Samruk Energy, which co-manage the large Bogatyr Komir coal mining venture, have expressed concern that sanctions may financially hamper ongoing Russian-Kazakh energy projects.
Kazakhstan’s international relations are not all negatively affecting the economy. China has an established interest in long-term strategic investments in country, and continues to aid the economy by financing projects. Chinese investments in Kazakhstan have tended to focus on infrastructure recently, as the Silk Road Economic Belt continues to advance through the form of ambitious transport and energy infrastructure developments. A key example is the dry port, the Khorgos Gateway, situated on the border between Kazakhstan and China. From a patch of barren land 10 years ago, Khorgos has been developed into a transit hub for high-speed rail connections between China and Europe, while also becoming the base for several new towns.
Chinese investment is also present in the AIX, where the Shanghai Stock Exchange owns a 25.1% stake and is a strategic partner. Hence, it is no surprise that financiers such as the China Development Bank and the China International Capital Corporations are registered as official members of the AIFC, with more stakeholders expected to join if Nazarbayev’s privatisation plans are realised.
Domestically, the Kazakh government is attempting to diversify the country away from its dependence on hydrocarbons by embracing renewable energy. To encourage renewable energy power plant development, the government recently introduced state support for renewable energy generation. Further attempts to make the country more environmentally friendly include new regulations governing the treatment of waste, and an international expo on alternative energy sources during 2017.
Recently the AIFC also announced plans to contribute towards sustainable development by ensuring the issuance of the nation’s first green bonds and green sukuks on its trading platform. Encouraged by the government’s initiatives, the European Bank of Reconstruction and Development (EBRD) has invested over $8.5 billion in Kazakhstan on green schemes including the development of solar projects and the introduction of electric powered transportation.