Expert Perspective|Renate Bekotourwolf: Global trade routes should be diversified and more alternative routes should be promoted

Renat Bekotullov

President of the Astana International Financial Centre

Renat BEKTUROV

Governor of Astana International Financial Centre

Q: Post-pandemic regionalization and cooperation have also shown a new development trend. In what areas should and can Asian countries strengthen cooperation?

A: Asia is the most populous continent and economic growth has been dynamic. In particular, the economies of Asian countries are quite complementary and there are many areas where cooperation can be carried out, but my main focus is on strengthening infrastructure and deepening financial connectivity.

Geopolitical tensions are one of the reasons for the contraction of global trade. Against this backdrop, we need to diversify our global trade routes and promote more alternative routes, which will obviously require significant investment in infrastructure and a range of "soft connectivity" measures, such as the removal of non-trade barriers, digital transformation and improved asset management. The European Bank for Reconstruction and Development (EBRD) estimates that more than 30 infrastructure projects will need to be implemented in Central Asia, with a total investment of 18.5 billion euros, to ensure the smooth flow of transport between Europe and Asia. And these investments need to be combined with the implementation of seven soft connection measures.

To boost trade between Eurasia, Kazakhstan has launched a series of infrastructure development projects for the Middle Corridor initiative. If these investments and "soft connectivity" measures are successfully implemented, the volume of containers passing through the Trans-Caspian International Transport Corridor is expected to increase from 18,000 TEUs in 2022 to 865,000 TEUs in 2040, an increase of about 48 times.

In the process of carrying out joint projects for trade and investment, and managing related risks, we need to further strengthen financial connectivity among countries in the region. In 2013, trade between Central Asia and East and Southeast Asia amounted to $52.5 billion, and has not changed much since then (about $53 billion in 2021). The same is true in the area of foreign direct investment. Given the region's remarkable economic growth over the past decade, it is clear that there is still enormous potential for trade and investment.

The Astana International Financial Centre has an important role to play in strengthening the financial connectivity of East and Central Asia in the field of trade and investment. The Astana International Financial Centre is now a comprehensive and regulated international financial trading platform that can provide a wide range of financial instruments for enterprises. With a robust regulatory framework in line with international best practices, the AIFC can provide investors with a safe and transparent investment environment, and can also act as a hub for regional cooperation and collaboration, building bridges between businesses and global financial institutions.

Q: In the face of rapid technological advancement, how to monitor the development of AI without harming humanity and in line with human values and global interests is a question of the times that must be answered. As countries around the world have different regulatory philosophies and practices on this, how to build a regulatory mechanism that can adapt to the changing characteristics of AI and meet the needs of global governance?

A: Around the world, major financial organizations have achieved fruitful results through the application of AI technology, such as improving efficiency, enriching customer service experience, and reducing financial risks. Global financial giants such as Goldman Sachs and JPMorgan Chase have created a number of exciting applications that demonstrate the transformative power of AI, especially in automating decision-making processes and optimizing customer service operations.

The experience of DIFC's diverse platform for risk analysis and market trend forecasting that actively leverages AI technology shows that the regulatory framework must be able to adapt to every nuanced advancement in AI technology. International cooperation is generally recognized as essential to set harmonized standards and guidelines to ensure responsible AI governance, and only then can a coordinated regulatory approach be adopted across jurisdictions.

The financial services industry must consider ethical aspects when applying AI technology, and must adhere to the principles of transparency and accountability, only in order to maintain the trust of customers and maintain its image of honesty and trustworthiness. Mastercard, for example, has been transparent about its algorithmic processes and continuously monitored when it applies AI technology to fraud prevention and anomaly detection, which has played a crucial role in mitigating risk and preventing possible abuse.

In order to establish a monitoring mechanism for AI applications in the financial sector, a multi-pronged approach is necessary. Regulators need to navigate the complexities of AI governance by promoting international cooperation, adopting flexible regulatory frameworks that engage stakeholders, adhering to ethical standards, ensuring transparency and accountability, and continuously monitoring the health of AI systems and investing in capacity building. A comprehensive regulatory strategy can not only help the financial industry apply AI more prudently, but also drive sustainable growth and innovation in the financial industry, while guarding against potential risks and ethical failures.

Q: Throughout the history of industrial development, international exchanges and cooperation have been inseparable from scientific and technological breakthroughs such as semiconductors and new energy that have changed society and development. Under the current global situation, how to promote international cooperation in scientific and technological innovation?

A: There are several tasks that are critical to promoting international cooperation in science, technology and innovation in today's global landscape.

First, it is necessary to create and nurture collaborative platforms conducive to knowledge sharing, collaborative research and technology transfer, second, to encourage open access to scientific research results, data and resources for all interested parties, third, governments, transnational organizations and private sector entities can invest in joint research programmes with a mission to address global challenges, and to pool resources and expertise to address complex issues such as climate change, healthcare and cybersecurity; Programs such as joint training programs and international scholarships to enhance talent mobility and enhance cross-border cooperation.

Fifth, there is a need to coordinate national standards and regulations to improve the interoperability and compatibility of relevant technologies. By establishing common standards in areas such as data privacy, cybersecurity, and intellectual property, stakeholders can trust each other more.

Last but not least, we need to support "science diplomacy". We need to use science diplomacy as a tool to promote international cooperation, help bridge political differences, and advance inter-state dialogue.

Q: At COP28, there was an important international consensus to move away from traditional energy sources such as coal, oil and natural gas, but at the same time, fossil fuels with emission reduction technologies will remain an important part of the future energy landscape. How can international negotiations and cooperation create incentives for developed countries to do so, while at the same time helping relatively underdeveloped countries to have sufficient resources to complete the transition smoothly?

A: It is obviously unfair to ask developing countries to sacrifice their national development and abandon the modernization process in the name of protecting the climate. Until non-fossil fuels are competitive and reliable enough to replace fossil fuels, it is pragmatic to adopt fossil fuels, especially natural gas, as a pre-decarbonization transition option. Therefore, the priority now is to develop and promote technologies that can maximize the cleanness of fossil energy. Nuclear energy also plays an important role in many parts of the world, and Kazakhstan is seriously considering whether to invest more in nuclear energy.

While the future of fossil fuels is fraught with challenges, there are opportunities in the low-carbon world of the future, such as advances in carbon capture and storage technology, that can help preserve their place. As a result of early adoption in developed countries, the cost of many energy-efficient, renewable energy technologies has been significantly reduced, and it would be wise for the countries of the South to invest now.

As for how to motivate developed countries to help complete the energy transition, in addition to calling on relevant countries to make stronger commitments, expand climate finance and enrich the global climate fund, further optimize the investment environment and create better cooperation opportunities. Measures that could be taken include encouraging developed countries to invest in green bonds and sustainable development projects in less developed countries by adhering to the highest standards and increasing investor trust, promoting cooperation between developed and developing countries to address common challenges in the transition to clean energy, and signing green trade agreements to provide trade preferences to both trading partners that are actively transitioning to clean energy.

Q: New development trends in regional cooperation have emerged after the COVID-19 pandemic. In what areas should Asian nations focus on bolstering cooperation?

A: Asia is the largest continent in terms of population, and the region has been demonstrating dynamic economic growth. Importantly, the Asian nations have complementing economies, therefore there are many areas where Asian countries could cooperate, I would like to focus on enhancing infrastructure and financial connectivity in the region.

Geopolitical tensions are one of the reasons for the decline in global trade. Global trade routes should be diversified, and more alternative routes should be promoted, which obviously requires significant investments in hard infrastructure and implementation of soft connectivity measures, such as removal of nontrade barriers, digitalization, and improved asset management. For example, the EBRD estimates investment needs of 18.5 bln euro for over 30 infrastructure projects in Central Asia to ensure the sustainable transport connections between Europe and Asia. And these investments need to be coupled with seven soft connectivity measures.

Kazakhstan has initiated a range of infrastructure projects for the development of the Middle Corridor to bolster trade on the continent. If the mentioned investment projects and soft connectivity measures are implemented, transit container volume via the Central Trans-Caspian Network is forecast to increase from 18,000 TEUs in 2022 to 865,000 TEUs in 2040, which means an increase of around 48 times.

As we trade with each other, invest in and implement joint projects, and manage related risks, we need to further enhance financial connectivity between the countries in the region. Trade turnover of Central Asia with East and Southeast Asia amounted to $52.5 billion in 2013, and since then has not changed much (around $53 billion in 2021). The same is true in terms of FDI. As our economies have grown significantly over the last 10 years, clearly, there is still significant unlocked potential between our regions in terms of trade and investment.

The AIFC can play a vital role in bridging the gap between Central Asia and East Asia, by facilitating financial connectivity for trade and investment, today the AIFC offers a comprehensive and well-regulated platform for international financial transactions, and provides businesses with access to a diverse range of financial instruments. With a robust regulatory framework aligned with international best practices, AIFC ensures a secure and transparent environment for investors and serves as a hub for regional cooperation and collaboration, connecting businesses with global financial institutions.

Q: Given the rapid advancement of technology, ensuring AI does not endanger humanity and that it is compatible with human values and global interests are key issues for our time. Differences exist among countries in terms of their approaches and methods to supervising AI. How can we build an oversight mechanism that can accommodate the ever-changing nature of AI and meet global governance requirements at the same time?

A: The integration of AI into financial organizations worldwide has yielded remarkable outcomes, including heightened efficiency, enriched customer service experiences, and diminished financial risks. Noteworthy instances from global financial juggernauts like Goldman Sachs and JPMorgan Chase underscore the transformative capabilities of AI, particularly in automating decision-making processes and optimizing customer service operations.

Taking cues from initiatives within the Dubai International Financial Centre (DIFC), where multifaceted platforms harness AI for risk analysis and market trend forecasting, regulatory frameworks must exhibit adaptability to accommodate the dynamic nuances of AI technology. International collaboration is deemed paramount in establishing uniform standards and guidelines to ensure responsible AI governance, fostering a harmonized approach across diverse jurisdictions.

Ethical considerations loom large in the deployment of AI within financial services, necessitating transparent and accountable practices to uphold trust and integrity. As evidenced by Mastercard’s utilization of AI for fraud prevention and anomaly detection, transparency in algorithmic processes and continuous monitoring are imperative to mitigate risks and safeguard against potential misuse.

Addressing the question of establishing oversight mechanisms for AI in finance necessitates a multifaceted approach. By fostering international collaboration, embracing flexible regulatory frameworks, engaging stakeholders, adhering to ethical guidelines, ensuring transparency and accountability, continuously monitoring AI systems, and investing in capacity building, regulators can adeptly navigate the complexities of AI governance. This comprehensive strategy not only facilitates the prudent adoption of AI in finance but also propels the financial industry towards sustainable growth and innovation while safeguarding against potential risks and ethical lapses.

Q: International exchange and cooperation is integral to scientific and technological breakthroughs. Given the current global situation, how can we advance international cooperation in the area of scientific and technological innovation?

A: To propel international cooperation in scientific and technological innovation amidst the contemporary global landscape, several key strategies can be employed.

Firstly, creating and nurturing collaborative platforms that facilitate knowledge sharing, research partnerships, and technology transfer is essential.

Secondly, encouraging open access to scientific research findings, data, and resources can foster greater collaboration and innovation.

Thirdly, governments, multinational organizations, and private sector entities can invest in joint research initiatives that tackle global challenges and leverage complementary strengths, which can pool resources and expertise to address complex issues such as climate change, healthcare, and cybersecurity.

Fourthly, promoting talent mobility through programs such as exchange programs, joint training initiatives, and international fellowships can enhance cross-border collaboration.

Fifthly, Harmonizing standards and regulations across countries can facilitate interoperability and compatibility of technologies, thereby facilitating international collaboration. Establishing common standards in areas such as data privacy, cybersecurity, and intellectual property rights can foster trust and facilitate cooperation among stakeholders.

Last but not the least, we need support for science diplomacy. Leveraging science diplomacy as a tool for fostering international cooperation can bridge political divides and facilitate dialogue among nations.

Q: A significant consensus was reached at COP28. There should be a gradual transitioning away from traditional fuels, but fossil fuels that are subjected to emission reduction technologies will remain a key component of the future energy landscape. How can we construct incentives that encourage developed countries to abide by this consensus and ensure that less developed countries have the resources they need complete their transition?

A: It would not be fair to demand that developing countries sacrifice national development and modernization in the name of climate protection. And there is an understanding that fossil fuels, especially natural gas, are a practical bridge toward a decarbonized future until non-fossil energy sources become competitive and reliable enough to replace them. The priority should therefore be the development and dissemination of technologies to process fossil fuels as cleanly as possible. Nuclear energy will also play an essential role in many parts of the world, and in Kazakhstan it is considered seriously. Despite the challenges facing the future of fossil fuels, there are also several opportunities that could help sustain some of their use in a low-carbon world, such as the advancement of CCS technology . Many energy-efficient and renewable energy technologies whose costs have been reduced through prior implementation in developed countries will be good investment targets for the Global South.

As for incentivizing developed countries to assist in this transition, aside from calling for more ambitious pledges to enable a scale-up in climate financing and replenishment of global climate funds, there is a room to provide better investment climates and collaborative initiatives. These include:

Encouraging developed countries to invest in green bonds and sustainable projects in less developed countries by ensuring adherence to best standards to foster credibility among investors.

Promoting collaborative initiatives between developed and developing countries to address common challenges in the transition to clean energy.

Green trade agreements that provide trade benefits for both trading partners actively transitioning to clean energy.