Assessing the Macroeconomic Impact of AIFC on Kazakhstan: FDI attraction and Job Creation

Assessing the Macroeconomic Impact of AIFC on Kazakhstan: FDI attraction and Job Creation

Ramadan Khairullin

CEO

Law Council Group

www.lcg.kz

Introduction

The Astana International Financial Centre (AIFC), launched in 2018, is a pivotal initiative for Kazakhstan's economic diversification. Its goal is to integrate the country into global financial markets, foster capital inflows, and expand the financial sector. This analysis evaluates AIFC's macroeconomic impact, focusing on GDP growth, FDI attraction, and job creation, comparing AIFC’s reports to findings from Bureau of National Statistics and National Bank of Kazakhstan.

FDI Attraction through AIFC and how it contributes to Kazakhstan’s GDP?

The AIFC has significantly enhanced Kazakhstan’s economic structure by increasing the financial sector’s role in GDP generation. Since its establishment in 2018, the AIFC has attracted 5.8 trillion KZT in cumulative investments, consisting of 3.2 trillion KZT in direct investments from its participants and 2.6 trillion KZT in portfolio investments through the Astana International Exchange (AIX) (AIFC, 2024).

Comparative analysis from previous years highlights the rapid expansion of AIFC’s economic impact. For instance, in 2020, investments totaled 2.2 billion $, showing a 464 % increase (12.4 billion $) by 2024 which can be seen from Figure 1 below (Bekturov et al., 2024). To illustrate the whole picture of AIFC’s contribution to FDI attraction, we compared the share of AIFC investments in overall FDI for the same periods. As per National Bank of Kazakhstan (2024), FDI volume for 2020 accounted for 151.91 billion $, which means that investments attracted via AIFC ecosystem had a 1.45 % share in total. Meanwhile, FDI volume for the first half of 2024 accounted for 159.4 billion $ (National Bank of Kazakhstan, 2024) and AIFC investments’ share was 7.78 %. This steady annual growth rate in portfolio investments reflects AIFC’s rising credibility as a platform for international and local issuers.

Investments Attracted via the AIFC Ecosystem (cumulative, 2018-H1 2024). Retrieved from Bekturov et al., 2024.

Key drivers in the growth in GDP contribution stems from:

1. Expanded Financial Activities: The establishment of new financial services, including fintech, green finance, and Islamic banking, has broadened the scope of economic activities tied to the AIFC.
   
   
2. Global Connectivity via AIX:Investments flowing through AIX stimulate secondary economic activities, such as real estate development and professional services. AIX's partnerships with Nasdaq and the Shanghai Stock Exchange also enhance its appeal to global investors. By the end of 2023, AIX had listed 148 securities, representing a 47% increase compared to 2020. The growing volume of traded securities underscores its ability to mobilize capital.
   
   
3. Tax incentives and operational advantages:Tax exemptions on corporate income, land, and property taxes for up to 50 years. Simplified licensing processes and the ability to re-domicile businesses into the AIFC with minimal regulatory hurdles.
   
   

   (Bekturov et al., 2024).

Bekturov et al. (2024) indicate that FDI sources and sectors have become increasingly diversified. Regionally, 42% of investments originate from Europe and North America, while 35% are attributed to Asia-Pacific markets. In terms of sectoral allocation, investment flows are primarily concentrated in finance (35%), followed by infrastructure (25%) and technology (15%), aligning with AIFC’s strategic focus on these high-growth areas.

Job creation and tax payments

Since its establishment in 2018, AIFC participants have created a total of 7,603 jobs within Kazakhstan, with incremental growth each year. This figure represents the cumulative number of local positions generated across various sectors affiliated with AIFC’s activities, illustrating AIFC’s impact on the Kazakhstani labor market. Starting with 310 jobs in 2018, AIFC's job creation efforts expanded steadily:

• By 2019, the number of jobs increased by 653 to reach a total of 963.
• 2020 saw an additional 1,423 jobs, totaling 2,386.
• This upward trend continued, with 4,044 jobs by 2021, 6,549 jobs by 2022, and 7,330 jobs by 2023.
• In H1 2024 alone, 273 new jobs were created, bringing the cumulative total to 7,603.

Local jobs created by the AIFC Participants (cumulative, 2018-H1 2024). Retrieved from Bekturov et al., 2024.

The 7,603 jobs created by AIFC participants are distributed across three main types of companies, showcasing AIFC’s diverse business ecosystem:

• Financial companies: These companies generated 2,654 jobs (approximately 35% of total jobs). This sector includes banks, asset managers, and fintech firms that directly contribute to the core financial activities at AIFC.
• Other companies: The majority of jobs 4,682 (or 61%) were created by companies in various other sectors, including information and communication, wholesale and retail trade, mining, and professional services. The largest share within this group was from the information and communication sector, creating 2,616 jobs.
• Professional services companies: Contributing to 267 jobs (around 4% of total employment), this sector includes legal, consulting, and auditing firms that provide essential support services to AIFC and its financial entities.

Thanks to the creation of such workplaces, 115 billion KZT of taxes was paid by AIFC participants since 2018. To demonstrate the real dynamics in tax payments (AIFC payment’s share in total tax payments), we retrieved the official data from the Bureau of National Statistics (2024) and compared those numbers to AIFC’s report shown in Figure 3. As a result, AIFC’ share in 2020 was 0.078 % (5.3 billion KZT/ 6,811.2 billion KZT), while for the first half of 2024, this number increased to 0.188 % (29.8 billion KZT/ 15,820)

Growth in the taxes paid by AIFC Participants (cumulative, 2018-H1 2024). Retrieved from Bekturov et al., 2024

Conclusion

AIFC has emerged as a key player in Kazakhstan's economic diversification, significantly influencing foreign direct investment inflows and job creation. By attracting over 5.8 trillion KZT in cumulative investments and generating more than 7,600 high-skilled jobs, AIFC has demonstrated its capacity to integrate Kazakhstan into global financial markets. The increasing share of AIFC participants in national tax contributions, growing from 0.078% in 2020 to 0.188% in H1 2024, further underscores its expanding economic role. These achievements position AIFC as a vital component in the country's long-term economic strategy, highlighting its potential to drive sustainable growth and competitiveness in the Central Asian region.

Liability exclusion

This material is for general informational purposes only and does not constitute legal or professional advice. No part of this document should be relied upon or used as a substitute for legal consultation. Please note that legal standards and practices may have changed since the publication date. For any questions, feel free to contact us via (WhatsApp:+7 (707) 384 83 52, or email at info@lcg.kz).

Reference List:

AIFC Instagram. (2024, November 5). AIFC participants paid 126.5 billion KZT taxes since 2018.Instagram.

Bekturov, M., et al. (2024). AIFC Participants Overview, H1 2024. AIFC.

Department of National Accounts. (2023, June 22). Key Indicators of Financial and Economic Activity for 2022 Key Indicators of Financial and Economic Activity for 2022

National Bank of Kazakhstan. (2024). Direct investments by investment direction. Retrieved from https://nationalbank.kz/ru/news/pryamye-investicii-po-napravleniyu-vlozheniya