Kazakhstan’s Financial Center Offers Georgian Businesses Investment Opportunities
On December 6, a conference ‘Astana International Financial Center: New Opportunities for Business Development and Growth’ brought together senior staff from the Astana Financial Center and business executives in Tbilisi. The newly created financial center aims to provide companies with a platform to attract investments. Supported by Tbilisinomics Policy Advisors, the conference was attended by representatives from the IMF, National Bank and Pension Fund of Georgia, as well as executives from over 50 Georgian companies representing various sectors.
Attracting investments is a key priority for Georgian companies. Banks’ high interest rates hinder raising funds through loans and credits. Businesses are therefore prepared to look elsewhere to attract external financing.
Global investors are the obvious alternative to gain funding. Indeed, Georgia’s Statistics Service calculated that foreign direct investments increased from $1bn to 1.86bn from 2013-2017. The investors, primarily from Azerbaijan, Turkey, the Netherlands, Czech Republic, the US, United Arab Emirates and China, among others, financially supported various sectors in Georgia. In 2017, Georgian assets received $527,1 mln in transportation and communications, $303,3 mln in financial services, $294,6 mln in construction, and $222,9 mln in other sectors.
Georgian companies may now access global investment resources through the Astana International Financial Center (AIFC) which opened early 2018. Operating under the English common law of jurisdiction, the center offers a range of tax, visa, and operational incentives such as corporate tax exemption on income received from providing financial and ancillary services and capital gains for 50 years. Under the program, employees are also exempted from individual income tax.
Through the AIFC, central Eurasian countries, including Georgia, can engage with global investors from China, the US, Europe, and the Middle East. Kazakhstan’s president Nazarbayev introduced constitutional amendments and the country’s parliament adopted several dozen legislative acts in order to create such a jurisdiction.
A key way to raise capital at AIFC is through placing securities on the Center’s stock exchange, AIX. The Shanghai Stock Exchange, Silk Road Fund, NASDAQ and Goldman Sachs are participating shareholders and partners in the exchange. On November 14, an IPO of Kazatomprom, a global leader in the uranium sector, became the first company to be listed on AIX.
AIX targets both large and medium-sized businesses. “We are primarily expecting businesses from countries in Central Eurasia, including Georgia. Several infrastructure projects are actively developing in Georgia, including East-West automotive highway and Baku-Tbilisi-Kars railway route, among others. Infrastructure is one of the main development drivers in the region, and it’s quite natural for global investors to be interested in Georgia and its companies,” stated AIFC Governor Kairat Kelimbetov.
With around 100 companies already registered as AIFC participants, including China Development Bank, several hundred more are expected to register by 2020. The Center should provide a platform for Georgian companies to develop with necessary financial support from international investors.
By Amy Jones