Friday, September 28, 2018

Geopolitical Monitor: The AIFC: Kazakhstan’s Ambitious Step Forward

"The AIFC: Kazakhstan’s Ambitious Step Forward"
Wilder Alejandro Sanchez
Geopolitical Monitor
Opinion
28 September 2018
Originally published: https://www.geopoliticalmonitor.com/the-aifc-kazakhstans-ambitious-step-forward/

The government of Kazakhstan launched its ambitious new project, the Astana International Financial Centre (AIFC), on 5 July. Ideally, the AIFC will turn the Central Asian nation into a Eurasian commercial and trade hub, bringing in clients from Asia, Europe, and the Middle East. It is too early to predict the success or failure of this nascent organization, but we can view the AIFC through the prism of the Kazakh government’s grand diplomatic strategy.

Introducing the AIFC
The AIFC is part of the Kazakh regime’s “100 Concrete Steps Plan” to turn Kazakhstan into one of the 30 most developed economies by 2050. Its objective will be to transform Kazakhstan into a financial hub as it (ideally) becomes the pathway for investments and other opportunities for both the country and the wider Central Asian region.

To appeal to Western markets, the AIFC is comprised of various agencies, such as the AIFC Management Council; the AIFC Authority; the Astana Financial Services Authority; the AIFC Court; the AIFC International Arbitration Centre (IAC); and the AIFC Bureau for Continuing Professional Development.
The AIFC is based on the facilities of Expo 2017 Astana, and English will be its official language. It is reportedly based on “the best models of the financial centers in New York, Singapore, London, and Dubai.” In order to increase its credentials, NASDAQ and the AIFC signed an agreement in 2017 which includes implementing the Nasdaq Matching Engine, a trading platform. The Shanghai Stock Exchange is similarly involved with the AIFC.

What exactly is the AIFC trying to do? The answer is: a little bit of everything. An Astana Times article explains a few of the AIFC’s projects: e-Justice (AIFC digital financial system), digital crypto-exchange, a crypto-currency depository, financial supermarket, cyber-security center, Islamic financial technologies, and international start-up program aimed at creating an ecosystem of innovative financial technology. Similarly, a NASDAQ 2017 press release declares that the AIFC’s goal is to “attract investment into the economy through the establishment of an attractive environment for investment in financial services, to develop local capital markets, to ensure their integration with the international capital market, and to develop markets for insurance and banking services for Kazakhstan.”

In search of an effective arbitration system
The Court and the International Arbitration Centre deserve particular attention as they are structured after English law, in order to be more appealing to Western markets, while “party-friendly arbitration rules” have also been put in place. The IAC chairperson is Barbara Dohmann QC, who has worked at the Paris International Chamber of Commerce, along with other renowned agencies. The IAC has 28 arbitrators and mediators, including Aigoul Kenjebayeva, Managing Partner of Dentons, Europe, Almaty and Astana, and Alexander Korobeinikov, Counsel, Baker & McKenzie – CIS Limited. As for the Court, it is independent from Kazakhstan’s judicial system and will be the governing body for disputes between “AIFC participants, AIFC bodies and/or their foreign employees.”

The image of the Arbitration Centre will be critically important for the future of the AIFC.  The Kazakh judicial system has been critiqued for its lack of fairness, hence it comes as no surprise that the AIFC will be a separate entity, complete with foreign arbitrators, which will hopefully give potential AIFC clients confidence in its impartiality. It is similarly positive that this agency is reportedly modeled on the renowned DIFC-LCIA Arbitration Centre.

An arbitration specialist interviewed by the author noted that it will be important to clarify how the IAFC’s arbitration court will function in relation to bilateral investment treaties (BITs). The specialist has studied the AIFC’s constitutional statutes, which state that any previously signed and ratified treaties, including bilateral investment treaties, take priority over AIFC agreements; “this will be good for the client, but the AIFC’s arbitration center could find it challenging to become a relevant agency if it is overruled by BITs,” the expert concluded. On the other hand, the provisions on arbitration appear to be efficient and up-to-date, and they even “take into account certain matters that have not been covered in previous arbitration rules. This shows that [the AIFC] is not improvising rules, but rather it has applied careful consideration, it has learned from arbitration precedents and is attempting to improve them.” In other words, the AIFC’s arbitration center, unlike the Kazakh judicial system, appears to be set up for professional and impartial rulings.

Discussion
During the ceremonial launch of the initiative, President Nursultan Nazarbayev highlighted that “AIFC participants will have access to the capital not only of Kazakhstan and the region, but the whole world. Unprecedented conditions have been created here that have no analogues in the post-Soviet space.” The AIFC also hopes to capitalize on China’s Belt and Road Initiative (BRI), as Kazakh Deputy Foreign Minister, Roman Vassilenko has declared that “the whole idea of the Astana International Financial Center is to serve not only as the hub for Central Asia, but also for the Silk Road project.”

In spite of the Kazakh government’s expectations and ambitions regarding the AFIC, there are some issues to consider that may influence its success (or lack thereof). First of all: location (still) matters. As developed and stable as Kazakhstan may be, particularly when compared to its neighbors, Central Asia is still fairly geographically distant from Western European and Asian markets. The AIFC is trying to solve this problem by reportedly not making it mandatory for clients to have offices in Kazakhstan, though tax free and visa-waivers have been imposed in order to attract people to visit the country (citizens of OECD states, the US, and several other nations do not require visas).

Moreover, there is the issue of how to attract customers and investors. Two of Kazakhstan’s neighbors, Kyrgyzstan and Tajikistan, have small markets. Meanwhile, Turkmenistan is well known for its secrecy and shunning of the outside world. The bright light is that Uzbekistan’s new government is keen to open up to the world, and the AIFC could be a valuable conduit. In other words, the other “stans” will not be major investors in the AIFC. China is a natural target, and the Belt and Road Initiative is China’s masterplan to expand its commercial relations and influence across Eurasia, but why would Beijing let the AIFC take the lead in this project?

The AIFC’s personnel and the headquarters are also factors to keep in mind. The Center’s language will be English, but Kazakhs mostly speak either Kazakh or Russian, a legacy of the Soviet Union. Will Astana promote teaching English in schools so young Kazakhs can work at the AIFC? One alternative is the Bolashak scholarship programme, which sends Kazakhs to study abroad and then, after graduating, they return to work in their homeland. Finally, Astana is not London or New York, hence the city itself will have to expand its list of amenities to attract foreigners (particularly the ones living in Almaty).

As a final point, there is always the concern that while well-intentioned, the AIFC could backfire. At the 2018 PONARS Conference in Washington DC, a panelist responded to a question from the author on the AIFC, stating that this is an intriguing idea, but one pressing concern is that it could be “subverted by its own stakeholders.”

Not everything is a concern
To be fair, there are valid reasons why investors should look at Kazakhstan with interest and why the AIFC could work. After all, the Central Asian state has enjoyed steady economic growth a
The government of Kazakhstan launched its ambitious new project, the Astana International Financial Centre (AIFC), on 5 July. Ideally, the AIFC will turn the Central Asian nation into a Eurasian commercial and trade hub, bringing in clients from Asia, Europe, and the Middle East. It is too early to predict the success or failure of this nascent organization, but we can view the AIFC through the prism of the Kazakh government’s grand diplomatic strategy.

The AIFC and geopolitics
How does the AIFC fit into Kazakhstan’s foreign policy? Astana’s goal since achieving independence from the Soviet Union has been to not only become a regional power, but also attain global-level status. The country is generally regarded as the leader of Central Asia with its modern economy. Moreover, the country is currently a non-permanent member of the UN Security Council; it has been part of the mediation process in Iran and Syria, and an August meeting that may signal the end of the dispute over the Caspian Sea took place in Aktau, Kazakhstan.

Given its geopolitical situation, it is logical for the Kazakh government to look for innovative methods to improve its global standing.

Final thoughts
If the AIFC operates as expected, it would not only improve Kazakhstan’s global standing as a financial hub, but bring additional foreign investment into the country. This is one big “if” and Kazakhstan has a history of not always delivering on reform promises; but if it works, and clients utilize the AIFC to invest in the country and neighboring Central Asian nations, the AIFC could become an effective pillar of Kazakh development and foreign policy.

Wilder Alejandro Sanchez is an analyst who focuses on geopolitical, military, and cybersecurity issues. The views expressed in this article are those of the author alone and do not necessarily reflect those of any institutions with which the author is associated.

Wednesday, September 19, 2018

Providence: Venezuelan Refugees in Brazil: Is Xenophobia Replacing Kindness?


"Venezuelan Refugees in Brazil: Is Xenophobia Replacing Kindness?"
Wilder Alejandro Sanchez
Providence Magazine
19 September 2018
Originally published: https://providencemag.com/2018/09/venezuelan-refugees-in-brazil-is-xenophobia-replacing-kindness/

The number of Venezuelan citizens fleeing their homeland continues to grow due to the ongoing political and socioeconomic crisis in the country. While most Venezuelans have fled to Colombia (and from there to other countries), many have crossed into Brazil and settled in Roraima, a state that borders Venezuela.

The Brazilian government, broadly speaking, has been supportive of the Venezuelan refugees, but there have sadly been xenophobic incidents in recent weeks. As Brazil’s general elections are less than a month away on October 7, the question of what to do with these “others” has also become an electoral tool.
This situation is not new. When nations anywhere in the world receive an influx of migrants, the former can either be acceptive Good Samaritans of the latter, or turn a blind eye to their neighbors’ suffering. And the Bible tells us, “do to others what you would have them do to you” (Matt. 7:12).

The Situation Deteriorates
There are varying figures regarding how many Venezuelans have crossed into Brazil. A September 18 conference at the Center for Strategic and International Studies (CSIS) in Washington, DC, mentioned that there were an estimated 20,000 Venezuelan migrants and refugees in Brazil in 2017.  Moreover, some media sources report that around 16,000 Brazilians applied for refugee status in the first half of 2018, and another 13,000 did so in 2017. Nevertheless, this influx of migrants in a relatively short time frame makes counting them properly difficult. The UN estimates that around 800 Venezuelans cross the border every day. According to different outlets, some Venezuelans cross the border to apply for refugee status while others who cross already have visas or even no documentation.

The Brazilian military has transported Venezuelan families to states like Parana to ease the pressure on Roraima. Unfortunately, as the crisis continues we can expect more Venezuelans seeking refuge in Brazil.

While the general population and government seem to support the Venezuelans, there have been troubling incidents. For example, in August a Brazilian judge ordered the closure of the border, though that order was ultimately rescinded. More xenophobic attacks against the Venezuelans took place in Roraima in mid-August when “a mob of Brazilians” attacked Venezuelans because a business owner reported migrants had robbed him. Unfortunately, social media exacerbated the situation when some incorrectly claimed that the victim had been murdered. Because of the attack, an estimated 1,200 Venezuelans fled back across the border. According to the Venezuelan daily El Nacional, four Venezuelans in fact robbed the business owner, but neither he nor his spouse was murdered. Sadly, one (certainly deplorable) incident and a lie were enough to promote a violent attack against innocent Venezuelans.

Many residents of Roraima appear to accept the Venezuelan refugees. But after the mob attack, a local hotel owner was less charitable: “We have finally cleaned the city of the undesirable, who did not want to work and spent all day in the street not doing anything. Now [the town of] Pacaraima is pretty and clean like before. And I hope it stays like that.”

Xenophobia as a Political Tool
Equally troubling is that the Venezuelan refugees are becoming part of the political discourse leading up to Brazil’s general elections on October 7, and the aforementioned incident showcases what is on the Roraiman electorate’s mind. At a September 4 on-the-record conference on Brazil’s elections at the Wilson Center in Washington, DC, experts on Brazil explained that Roraima favors Jair Bolsonaro, the controversial right-wing presidential candidate, because of his populist and extremist rhetoric. Regarding the Venezuelan question, the candidate has declared that he favors creating refugee camps, as the Venezuelans “are causing instability” in the city of Boa Vista, Roraima.

This situation should be familiar to the reader. A country receives an unexpectedly large number of immigrants who speak another language and have different customs. While some locals are willing to accept their fellow human beings in need, others distrust these “others.”

Even more, certain political movements can resort to extremist rhetoric to capitalize on local populations’ resentments and concerns. For instance, the far-right, anti-immigration Sweden Democrats won a significant number of votes in Sweden’s election this month. An NPR analysis of this election explained that the party “scored about 18 percent of the vote, up from 13 percent in the last election, as many voters took a stand against recent record immigration to the country, a strain on social services that some have linked to that, and rising numbers of shootings in areas with high immigrant populations.” Similarly, US President Donald Trump has focused on undocumented migrants to the US, and even friendly governments (i.e., Canada), as the sources of US problems.

Final Thoughts
Developed nations like Sweden or the US continue to receive a steady stream of refugees that escape poverty, violence, and instability in their homelands. Similarly, the crisis in Venezuela has turned nearby developing nations, like Brazil, into recipients of refugees who search for a better life. Without a doubt, Brasilia, Stockholm, and Washington cannot accept an endless flux of refugees without taking into consideration how a sudden demographic shift may impact the country’s own population, positively or negatively.

At the same time, compassion and empathy are key aspects of what makes us human. Thus, migration policies should be rational, but also humane. The masses escaping Venezuela or the conflict areas in the Middle East are not doing so because they want to, but because they have to, and the occasional “rotten apple” (like Venezuelan criminals in Brazil) should not promote hate toward all migrants.


Wilder Alejandro Sanchez is an analyst who focuses on geopolitical, military, and cybersecurity issues. The views expressed in this article are those of the author alone and do not necessarily reflect those of any institutions with which the author is associated.

Monday, September 17, 2018

Quoted in: China Uses Space Diplomacy to Extend Its Inroads Into Latin America


"China Uses Space Diplomacy to Extend Its Inroads Into Latin America"
Andrew J. Wright
World Politics Review
10 September 2018
Originally published: https://www.worldpoliticsreview.com/articles/25820/china-uses-space-diplomacy-to-extend-its-inroads-into-latin-america 

[CITATION]

MEDELLIN, Colombia—China has quickly established an extensive track record of using infrastructure spending, on everything from stadiums to ports, to secure resources and bolster trade across Eurasia, Africa and Latin America. Security and space industry analysts now say 2018 has already been a banner year for another part of China’s soft power outreach, as it has sold satellites and support systems to Nigeria, Cambodia and Pakistan. China’s space ambitions are closely tied to its Belt and Road Initiative. By the end of the year, it is expected that a basic system of 18 Chinese BeiDou-3 global positioning satellites will serve countries such as Pakistan, Thailand and the United Arab Emirates—all partners in Beijing’s massive infrastructure and development program.

But it is in Latin America that China’s space diplomacy takes on an added dimension. The majority of the 17 countries that still recognize Taiwan are located in the region. While on a recent trip to Latin America, U.S. Defense Secretary James Mattis oversaw the signing of a new agreement with Brazil to share information about known space objects, including Brazilian satellites. They also discussed an agreement to allow the United States to launch satellites from Brazil’s Alcantara Launch Center. In neighboring Argentina, the Chinese military recently completed a mysterious $50 million ground station in the remote Patagonia region—for what it says are peaceful, non-military purposes of monitoring satellites and other space missions. ...

IPD: Kazakhstan’s Foreign Policy: Building Peace as a Legacy

"Kazakhstan’s Foreign Policy: Building Peace as a Legacy"
Wilder Alejandro Sanchez
International Policy Digest
17 September 2018
Originally published: https://intpolicydigest.org/2018/09/17/kazakhstan-s-foreign-policy-building-peace-as-a-legacy/


The Kazakh government hosted a gathering of the Group of Eminent Persons (GEM) and the Youth Group of the Comprehensive Nuclear-Test-Ban Treaty (CTBT) in late August 2018, during which Astana declared its intention to ratify the Treaty on the Prohibition of Nuclear Weapons (TPNW). Even though Kazakhstan does not possess nuclear weapons, this, mostly symbolic, initiative highlights the Kazakh government’s intention to promote regional (and global, in the case of nuclear weapons) peace. While Astana has not been particularly successful in this endeavor, nowadays good intentions still count.

Recent Initiatives

In recent years the Kazakh government has carried out a number of diplomatic initiatives to promote peaceful resolutions to conflicts.

The major examples include:

In mid-August 2018, a meeting was held in Aqtau. Kazakhstan, which brought together the presidents of the five nations that border the Caspian Sea: Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan. A 24-article agreement was signed which apparently signals the end of a dispute of how this body of water will be divided among the five governments.

Kazakhstan is a non-permanent member of the United Nation Security Council for 2017-2018, the first Central Asian state to achieve this membership. The country also held the UNSC’s rotating presidency in January 2018.

During the aforementioned hosting of the GEM and CTBT meetings, Kazakh Foreign Affairs Minister Kairat Abdrakhmanov declared: “we call on states to declare their support for the Treaty on the Prohibition of Nuclear Weapons. Kazakhstan signed the TPNW on March 2, 2018, and is currently preparing for its ratification.”

In 2013, Kazakhstan hosted peace talks on Iran’s nuclear program, and in 2017, the country hosted peace talks to compliment the Geneva process regarding the Syrian conflict.
Kazakh President Nursultan Nazarbayev has supported Eurasian integration, which culminated in the creation of the Eurasian Economic Union. The Kazakh regime has also supported the idea of establishing a Central Asian Union.
The Kazakh government is educating Afghan medical students so that they can return to their homeland and contribute to its development.

Finally it is worth noting that Astana has attempted to become a mediator in the Ukrainian conflict, though Belarus was not pleased about this as it already hosts the Minsk Process.

In declarations made on October 2017, Yerzhan Ashikbayev, Kazakhstan’s deputy foreign minister, summarized his government’s attitude towards mediation. The official stated that “we really believe in the power of dialogue…If countries, if conflicting parties feel better here, in the windy climate of Astana, they are welcome to come…If Kazakhstan can be of any practical assistance to achieving this noble goal, we are ready.”

Why Peace?
What is Kazahstan’s interest in peace-building and conflict mediation? One obvious reason is that a peaceful region benefits Kazakhstan. The Central Asian state is located in a particularly unstable area with security threats emanating out of Afghanistan, it is also close to Iran and is sandwiched between China and Russia. Promoting a military solution to the several disputes in Astana’s greater neighborhood (i.e. control of the Caspian Sea) will likely be counter-productive; hence it makes sense to promote peaceful initiatives. This would also help Astana’s reputation and international status grow, which have already helped the country obtain UNSC membership.

Another reason has also to do with improving the country’s image due to domestic issues. Kazakhstan has been governed by President Nursultan Nazarbayev since achieving independence from the Soviet Union in the early 1990s; the country’s elections are regularly condemned by the international community for their lack of transparency and democracy. After almost three decades in power, it is expected that President Nazarbayev, age 78, may leave power soon and he will likely want to leave behind a legacy of peace-building that can make up for his extended time in power and accusations of human rights abuses in his country.

The Kazakh regime’s motivations notwithstanding, the ultimate question is whether these pro-peace initiatives have been successful. Tragically the conflict in Afghanistan and Syria continues the future of Ukraine rests in Moscow; moreover, there is little interest by nuclear powers to give up their weapons of mass destruction (at the time of this writing, it is pointless to be optimistic about North Korea’s program).

With that said, there are reasons to be tentatively hopeful that the dispute over the Caspian Sea may be resolved – this would be a big step forward towards regional integration and cooperation, though, depending on how the final settlement is written, extra-regional powers like the U.S. may be the big losers. Similarly, the new regime in Tashkent is opening up to the rest of Central Asia and the world: an Astana-Tashkent alliance of sorts would be the cornerstone towards greater integration among the five Central Asian states.

Final Thoughts
A pillar of Kazakh foreign policy is promoting peace across Central Asia and even in more distant conflict areas. While its record and motivations are questionable, Astana’s ultimate objective is commendable.

The views expressed in this article are those of the author alone and do not necessarily reflect those of any institutions with which the author is associated.