Dec. 20 (UPI) -- Even with the Buenos Aires trade "cease-fire" announced between the United States and China, much uncertainty exists on the openness and rules of global trade. The arrest of Huawei's Meng Wanzhou in Canada may undermine the efforts to right U.S-China trade relations.
China will continue its overseas investment spree, including in Central Asia. There, we're seeing a new trade and investment infrastructure being put in place. And this is largely a good thing for the region.
The Silk Road Economic Belt -- the overland route of the Belt and Road Initiative -- hopes to make Central Asia a transnational economic bridge between European and Asian markets with commitments of over $1 trillion. Much of this new spending will be for the hard infrastructure -- highways, railroads, pipelines, dry ports, etc. -- established to facilitate the flow of goods. This is where the United States is punching below its weight, ceding ground to China. This needs to change.
The "software" of SREB -- customs rules, laws, cross-border fiscal agreements and regulations need to be in place -- and be globally compatible. Institutions, including capital markets and civil courts, arise. This is a tall order, but vital for the success of the great plan.
Subsequently, Central Asia is expected to attract financing from China's $40 billion Silk Road Fund. Chinese banks, state owned enterprises and private networks will offer yet more investment. Beyond that, multilateral development banks and international financial institutions, such as the Asian Development Bank, the Asian Infrastructure Investment Bank, the World Bank and others will pour billions into the region.
Due to its geography, Kazakhstan is the heart of Belt and Road, and many call Astana the capital "buckle of the belt." But other than location, what else makes Kazakhstan an attractive opportunity for foreign investment?
For starters, the country just jumped from 36th to 28th on the World Bank's 2019 Ease of Doing Business Index, released in November. The initiative ranks economies from 1 through 190 based on objective indicators related to a country's business environment. Kazakhstan jumped up 12 places. It seems that the Kazakh government's ambitious plans to reform the economy are coming to fruition.
But these changes seem to be just the tip of the iceberg. In July, Kazakhstan launched its Astana International Financial Center -- an ambitious project to create a powerful financial hub in its capital. The brainchild of President Nursultan Nazarbayev, AIFC boasts a diverse and forward-looking structure: the main pillars comprise capital markets, green finance, financial technology, asset management and Islamic finance.
The center is expected to attract $40 billion by 2025.
Participants are granted up to 50 years of exemption from corporate and personal income tax, while investors and businesses are guaranteed protection by the AIFC International Court and International Arbitration Center. What's more, AIFC is the first institution in the region with a special legal and constitutional regime that will operate a court based on English common law, and have English as its official language. Leading British jurists are sitting as the court's judges, headed by Lord Harry Woolf, the former British lord chief justice.
The AIFC state-of-the-art stock exchange, the Astana International Exchange, has partnered with the Shanghai Stock Exchange and is using American NASDAQ tech to draw foreign investment and help the country privatize the vestiges of its command economy.
Kazakhstan's Kazatomprom -- the largest uranium producer in the world -- launched an IPO through AIX earlier this month. This marks the first initial public offering of a large Kazakh company in more than a decade. Next year, AIX is expected to float stocks of other Kazakhstani national heavyweight champions, including Kazmunaigaz, the national oil and gas behemoth, Air Astana and Kaztelecom.
The AIFC will also be a key driver in facilitating Kazakhstan's push to diversify its economy away from natural resources and commodities toward a more modern, post-industrial model. Financial and legal services will contribute a high added value to the local economy and attract foreign investors.
AIFC is a milestone in Kazakhstan's market reform process that has been evolving since independence in 1991. If the government wishes to meet the ambitious development goals as laid out in the nation's 2050 strategy -- including to join the 30 most developed economies by 2050 -- it must embrace the free-market tenets espoused by the new financial center and apply them to the rest of the economy: transparency, predictable dispute settlement, professional, honest judges, technology innovation, market competition and limited government regulations.
An increasingly robust global financial and trade hub is emerging in Central Asia, and those who recognize and act upon the opportunities now will reap the benefits and counter this age of protectionism. The region and the world needs more reform-minded initiatives like AIFC, ones that do away with the stifling bureaucracy and quash corruption. It's their best bet to capitalize on the BRI. And it's a model for an open trade and investment infrastructure that the world can aim to emulate. Washington should do all it can to support and promote it.
Daniel A. Witt is president of the International Tax and Investment Center. He has been working on tax and investment reform in over 80 countries, including Central Asia, for 30 years.