Recently, a delegation of highly-placed people from the Central Asian Countries (CAC) visited India. They came to Mumbai to meet a cross section of people from whom they could get an idea of ways in which the CAC and India could work together, outside of oil, gas and minerals that these countries are conventionally known for. They were also here to seek out new partnerships for their International Finance Centre.
It may be recalled that India entertained such plans as well for over a decade. One reason such a concept will not take off in India easily is because it has not created the proper dispute redressal mechanism for speedy adjudication. It is clear that the CAC have.
This is among the many other services that CAC’s Astana International Financial Centre (AIFC) offers. Post a round-table organised by Observer Research Foundation (ORF), Amina Turgulova, Chief Global Markets Officer, Governor’s council, AIFC, (part of CAC delegation) spoke to The Free Press Journal’s Jescilia Karayamparambil.
How many participants have registered with AIFC?
Astana International Finance Centre (AIFC) is a regional financial hub based on the common jurisdiction and international regulatory framework. It has attracted a lot of international and regional investors as well as companies that seek to attract financing. So there are many areas in which we can cooperate and provide access to financial products.
We can also provide a platform to Indian companies to attract financing through AIFC from different regions as well as to western investors. We also have an arbitration centre and international financial court which can be used by any company around the world.
The judge and arbitrators from our arbitration centres are from Britain. In London, it would be expensive to address the issue but in Astana, effective arbitration can be possible far more speedily and in a less expensive manner. We have around 130 organisations/ companies that have registered as participants. We hope that this number would double by the end of the year. By next year, we are expecting 500 companies.
Most of the companies are fintech and have a number of investment banks and brokerage firms too. China Development Bank, Eurasian Development Bank and other financial institutions have registered with us as well. Some large global players will become our participants soon.
What feedback have you received from your counterparts around the world?
First and foremost, we understand that there is always a need to build trust. We can build trust only by having partners who have a good track record. And again this will be possible through our cooperation, project and work. At present, we have partners like NASDAQ, Microsoft, Visa etc.
How much investment has AIFC been able to attract?
It will be difficult to say how much has been raised so far, but as far as the number of companies and their calibre is concerned, I think we are on the right track. The figure which will be high for Kazakhstan but it will be low for India.
We hope that with more partnership with countries like India, Russia, China and Western financial communities, we are hoping to attract more investments.
In some cases, AIFC has attracted somewhere around 1.5 billion USD in case of Euro bonds and a public sector company that was privatised recently, attracted 450 million USD. Some of the finances came from regional and international investors, but we hope that the numbers will grow.
Do we see AIFC offer masala bonds as well?
We do look for investment banks that would be interested in partnering with us to introduce such financial products that work in the region. Once you introduce the financial products like Masala bonds in Kazakhstan, it can be useful to the Eurasian economy as a whole.
With your India visit, what kind of partnerships are you looking at?
We are looking at strategic partnerships and investments. Apart from finance, we are looking at knowledge sharing; helping develop the company and improving the shareholders’ value. This will help in making the company more transparent.
How have green bonds been doing at your centre?
AIFC in partnership with European Bank for Reconstruction and Development (EBRD) has established a green finance centre within the AIFC. The goal is to encourage companies to raise finance through sustainable finance products like green bonds. This will attract a number of green financial investors into sustainable finance products.
That could enable the setting up of joint funds. For instance, Helsinki Bank has set-up funds (under AIFC) to finance sustainable products. We are also working with municipalities like the Mayor’s office of Almaty (in Kazakhstan), Mayor’s office of Nur-Sultan (in Kazakhstan) etc, to raise green finance for the projects that would help sustainable development and are environmentally-conscious projects.
We are also discussing the possibility with the ministry of finance provided it can attract green financing into its budget. The ministry should make sure that there is a project which is devoted to sustainable development. Last week, World Alliance of International Financial Centers (WAIFC) — AIFC is founding member of the association — met to discuss and share our experience about different green finance products in different financial centres of the world.
Such discussions could benefit the Indian centres as well. I think it could be interesting for the Indian financial centre to look at it and become part of the association.
What are the other instruments AIFC is looking at?
g We have also introduced Islamic finance as a priority sector and (most CAC members have large Muslim populations), we have advanced considerably in this regard. We have created fintech hub too.
Right now, we are working on the SME (small and medium enterprises) finance platform. I think we can partner with Bombay Stock Exchange (BSE) for it. We are aware that a lot of SME financing is currently taking place through the BSE. We want to establish a regional hub for a pre-initial public offering (pre-IPO) type of platform for companies that cannot go to the market—maybe because they are too small or are not ready or do not have sufficient profits.
With this, we would like to give them a flexible mechanism for attracting financing. We are also looking at building an eco-system for investors like venture capitalists or angel investors or funds raised via crowd funding. Presently, we are discussing this with banks and investors.
Why crowd-funding and what are the risks here?
g We want to setup a flexible mechanism and more diverse funding. Thus, we are looking into crowd funding. This funding would be for companies that are into pre-listing phase or start-ups. Again crowd funding can be risky but the risk is limited to the amount that people are investing.
We are in the process of building the infrastructure and are looking for partners and potential investors for this. We are working with entrepreneurs towards this objective. On the one hand, we are building the capital market itself, and on other, we are building the ground for entrepreneurship.
Is AIFC looking at exploring blockchain technology?
g Our participants are developing blockchain technology and these are fintech companies that are mainly start-ups. We are not operating on any blockchain solutions, but we think we can introduce blockchain for some products. There are discussions on the potential to introduce blockchain solutions in commodities market.
If it is not for a trading platform, it could be used for a logistics hub. There are different types of ideas that are floating around. We need to still figure it out.
How can SMEs enjoy the benefits of AIFC?
The SMEs do not have to be our participants to attract finance. So they just come to our platform and present their investment story and attract financing. However in case of investors, they will have to register with AIFC. We have an easy Visa regime and non-taxable income programme for investors.
These registered AIFC’s participants will have to work in one of the areas like capital market, asset management, Islamic finance, fintech, private banking and any ancillary services like legal, audit, insurance and re-insurance; and they will not be taxed.
If there is a manufacturer and they want to register as a participant of AIFC, then they will not enjoy the income tax benefits as they are not within the scope of industries which is AIFC’s priority. We are very clear that we do not want to become a tax haven. If these manufacturers become out participants, then they are taxed (but low taxes).