Astana International Financial Center has every chance to become a true regional hub, since money goes where it can grow (the faster the better), Professor Ruslan Greenberg, Doctor of Economics, Scientific Director of the Economics Institute of the Russian Academy of Sciences, believes.
Astana International Financial Center’s development prospects were discussed at the Window of Opportunities: Investments and New Projects in Eurasia conference, arranged by RBC (Russian Business Consulting media group) on June 28 at the Russian Federation Chamber of Commerce and Industry.
“On the one hand, with Astana International Financial Center in existence, Russia and Kazakhstan, two fuel and mineral resources suppliers, have found ways of preserving stability in times of turbulence. That will allow preventing economic nosedives of 1998 and 2014. On the other hand, Astana International Financial Center project bears risks of unhealthy processes in the monetary system. To implement the plans of the economy structure diversification, both countries need direct investment. Yet an excessive openness to hot money can bring about some negative results”, Ruslan Greenberg believes.
In his view, the guarantee for a successful overriding of the potential hardships can be equal law enforcement for all market participants, national currencies’ stability, and solid government plans of implementing economic policies aimed at attracting long-term investments. Other essential factors are overcoming the scale disbalance of the players of the Eurasian Economic Union, and Russia’s rejection of its Big Brother syndrome.
Eurasian Economic Union’s four levels of freedom
At the conference, Ruslan Greenberg presented a report drafted by the Economics Institute of the Russian Academy of Sciences on the Eurasian integration. According to the economist, we now live in an epoch when the domination of the West is approaching its end. For 400 years the West has been encouraging inferiority complexes in all other countries. Trade conflicts, geopolitical instabilities, growing absolute mistrust are manifestations of the problems within the current integration. That opens up windows of opportunities in the Eurasian region. Until now, the geopolitics factor has had dominance in the consolidation of the core republics of the former USSR. The process is to leverage the development and cooperation of China and the USA. Yet the economic aspect is also visible.
By now, a high degree of integration within the Eurasian Economic Union has been achieved. Its members are part of the Customs Union and Common Economic Space. That ensures four freedoms: free movement of goods, services, capitals and labor force.
The next point on the agenda is shaping a common financial market. That suggests a harmonization of the laws, and a mutual recognition of licenses in banking, insurance and securities industries. According to Timur Zhaksylykov, Minister in Charge of Economy and Financial Policy at the Eurasian Economic commission, the process may be accomplished by 2025.
“Eurasian Economic Commission jointly with the regulators of the member states is promoting a common capitals market. Still, it is a sensitive issue. Until the matter is resolved, the situation will be favorable for large investors. Yet, medium private investment companies will not be eager to actively enter the market”, Timur Zhaksylykov thinks.
China, one of many options
Astana International Financial Center will be fully launched on July 5. Its role in shaping common rules of the game is now becoming dominant.
One of the main advantages of the new financial center is its ability to become a beneficiary of the positive effect of the integration initiatives of China within the One Belt and One Road endeavor, and the Eurasian Economic Union project which can substantially change the regional economic landscape. Kairat Kelimbetov, Governor of Astana International Finance Center, noted that at times of the revival of the transcontinental trade between China and Europe, a center for structuring large infrastructure projects is vital. In the jurisdictions competition, Kazakhstan seems to be the winner.
“Everyone wants to have its own international economic center, but far from everyone is ready for that”, Kairat Kelimbetov thinks. “The authorities of Kazakhstan have overcome the supersonic barrier and have set a regulations regime which is similar to that of Hong Kong, namely, One Country, Two Systems. Astana International Financial Center was not established to attract investments to Kazakhstan only, but to also provide services to the entire Central Asia and the Eurasian Economic Union”.
The authorities in Astana expect that within the next five to seven years about 50% of investments will be supplied by the Asian investors. 80% of that will come from China. Five of its major banks have been involved in the negotiations process. Further 30% will be provided by the Eurasian Economic Union partners (Russia’s share possibly reaching up to 90%). The remaining 20 % are expected to come from other countries, including Middle East and North America.
According to Vladimir Dmitriev, Vice-President of the Russian Federation Chamber of Commerce and Industry, it may seem at the first sight that the purpose of Russia and Kazakhstan is to meet the interests of China which is now building a new Silk Road. Yet in fact this is a chance to turn a beneficial geographical location between Europe and Asia into an advantage.
“For the Eurasian Economic Union countries, it is extremely important to take part in infrastructure projects promoted by China. Beneficiaries of Russia’s high speed rail road and a highway from Europe to Western China are (up to 70%) the national cargo shippers”, Dmitriev states.
Andrei Belyaninov, Chairman of the Board of the Eurasian Development Bank, believes the steps by Trump administration have stimulated the capitals market development in the region.
“Avoiding dollar evolves towards escaping dollar. That becomes the most attractive feature of the Eurasian Economic Union”, Belyaninov claims. “There is no lack of investment projects in the region. They are all infrastructure and finance intensive (such as BelKomUr (White Sea-Komi-Urals) railway and Northern Latitudinal Railway) and can change the financial arrangements in the participating countries and enhance national economies”.
By Anna Oreshkina