Kazakhstan's next challenge: accelerating financial development

Astana, Kazakhstan - EBRD

Delivered by: 

Sir Suma Chakrabarti, EBRD President

Venue: 

Astana, Kazakhstan

Event: 

Kazakhstan Foreign Investors' Council

Kazakhstan is EBRD's fourth largest market in terms of investment

Introduction

Dear President, your Excellencies, ladies and gentlemen,

It is an honour to be co-chairing once again this Foreign Investors' Council with President Nazarbayev.

This year, the theme under discussion is the very exciting plan to create the Astana International Financial Centre.

But, before I address that, first a couple of words about what we have done since we last met.

Agribusiness success

Last year, the theme was agriculture in Kazakhstan.

I said then that EBRD was ready to support private sector companies and bring in new investors into Kazakh agribusiness.

And you, Mr President, mentioned agriculture in your 100 Concrete Steps programme.

EBRD has really stepped up in this field over the last twelve months in Kazakhstan.

We have invested in edible oils with Savola.  We have supported expansion of the country’s milk processing, production of soft drinks, juices and malt through investments in RG Brands and Soufflet. Only yesterday I signed a loan agreement with a subsidiary of the world’s largest dairy company Lactalis. And we are also planning to invest in a poultry farm not far from Astana.‎

Last year, in total, we invested over €120 million in agriculture and food production in Kazakhstan and put a dedicated team on the ground.

That’s a major achievement that both the EBRD and Kazakhstan can be proud of. 

Increase in Kazakhstan and Central Asia

EBRD’s push on agribusiness projects is part of a much bigger overall increase in investment in Kazakhstan. Our total investment here for last year amounted to more than €700 million.

Kazakhstan is now our fourth largest market, out of 36 countries.

And this investment was driven by reform.

For example, new renewable energy legislation helped us to invest in the first wind and solar plants in the country – and the solar plant is privately owned.

Thanks to the innovative model of enhanced partnership between the EBRD and the Government, we have invested together in a vast range of public utilities and greener transport. All of which fits well with EBRD’s new Green Economy Transition approach.

And we launched a programme for financing and offering business advice to women-led enterprises in Kazakhstan, supported by the Kazakh government.   This is very much part of EBRD’s wider effort to bring everyone in to the economic marketplace.

And our Kazakh model of investment allied to reform underpins our whole approach to Central Asia.  Indeed, we held a very successful Central Asia Investment Forum in Istanbul in partnership with the FT.  This was on the back of a record year in 2015 of €1.4bn. of investment in Central Asia, a 75% increase on the year before.

AIFC

Now to the topic of today’s meeting, the Astana International Financial Centre, another of the proposed 100 Concrete Steps.

The EBRD has had a lot of recent experience with regional financial centres and stock exchanges.

We are supporting a virtual stock exchange network in South Eastern Europe. We are shareholders in exchanges in Istanbul and Moscow. 

So we are very interested in the idea of establishing an international financial centre here in Astana.

Here is our vision.

Close Links Between AIFC and Domestic Financial Sector. 

We believe that the AIFC must serve as an anchor for reform and the development of the domestic financial sector and maintain close links with it.

Some financial centres, like Dubai, have opted to separate their activities from the domestic sector.

But we believe that the AIFC and the domestic markets should grow and develop together. And we will work with you on that.

In a Memorandum of Understanding we recently signed with the National Bank of Kazakhstan and TheCityUk, we affirmed our support for establishment of the regulatory framework, strategy and other elements of the AIFC.

Under this memorandum, the EBRD will help establish adequate regulatory frameworks in such areas as capital markets, money and derivatives markets, and corporate governance.

Our experts have already held a workshop with the CEO and the team of AIFC on the development of stock exchange and capital markets.

Half of our financing in Kazakhstan is already in the local currency, the tenge.

After our successful experience some time ago with tenge bonds on international markets, we are now assessing what is needed for the EBRD to issue tenge-denominated bonds on the domestic market.

We will look at the AIFC as an issuance platform for tenge bonds.

Very importantly, the AIFC may also provide a platform for the national privatisation programme.

Some state-owned companies plan to float on the AIFC exchange. We are very interested in supporting that privatisation.

AIFC’s Partnership with other Financial Centres

AIFC also needs to be a partner for other financial centres. 

It will benefit far more from being a ‘partner’ than a ‘competitor’ to, say, Dubai or London.

And now, when the AIFC is being developed, is the time to develop close links with other financial centres.

Partnership with established financial centres, their institutions and professional services firms can bring a wealth of knowledge and commercial activity to Astana.

We stand ready to help AIFC establish these links.

AIFC and the Green Financial System

Let me turn now to AIFC’s potential to give momentum to the development of a green financial system.  The national strategy of a Green Economy is something that resonates powerfully with us at the EBRD.

We believe it essential for Kazakhstan’s financial system to be able to support the financing of sustainable energy and climate change mitigation projects.

The AIFC can play a key role here.

One of the newest ways of climate financing is through green bonds. In fact many of our Kazakh projects, from greener public transport to renewables, are already in our portfolio of green bonds. 

We earnestly hope that the AIFC develops in such a way as to encourage green bond issues in Kazakhstan in the future.

Conclusion

I understand that the AIFC will actually be located at the site of Astana’s Expo-2017 and that the Expo’s theme is “Energy of the Future”.

It sounds like a great location.

In fact, so great that I would like the EBRD team here in Astana to move there when they can.

Finally, I would add that introducing English law and English as a working language will be of enormous benefit to the new generation of young finance specialists in Kazakhstan. 

I also wish you every success, Mr President, in your new national programme making English the third language in education and the sciences and putting emphasis on subjects and skills which an employer like AIFC would need.

We have many brilliant Kazakh bankers working at the EBRD. And one thing they have in common, apart from being Kazakh, is a good command of English – and finance, of course.

Once again, it is great to be here today, among friends and partners. I look forward to hearing everybody’s thoughts on how to realise Kazakhstan’s potential – and of course the EBRD will continue to work hard alongside our partners here in Kazakhstan.

Thank you.