Almaty, December 4, 2003
.
Financing options for small and medium-sized businesses in Kazakhstan have improved considerably through critical changes to leasing legislation that were developed with the support of the International Finance Corporation, the private sector arm of the World Bank Group, and USAID. The amendments to the Tax Code were enacted by presidential signature on December 1, 2003.
The new amendments remove the key barrier to leasing. Prior to their enactment, leases had to be written for longer than 80 percent of the useful life of the equipment, often extending over a period of 10 years or more. Long leases contrasted with short-term financing opportunities and hindered investment in the sector.
The new amendments stipulate that all leases meet one of three classifications set by International Accounting Standard 17 and be at least 36 months long. In addition, the amendments remove VAT on import and clarified taxation for leaseback arrangements and cross-border leases. Previous tax advantages still apply; all leases over three years are exempted from corporate income tax. The new legal framework has established a strong foundation for leasing making it a significantly more attractive financial tool, particularly for small and medium-sized businesses.
Serik Akhmetov, president of the Kazakhstan Leasing Association said, “The legislative changes will promote a healthy leasing industry, facilitating the country’s economic development. We expect substantial growth among existing and the launch of new leasing companies. The leasing sector had been waiting for these amendments, and the opportunities for expansion are very favorable now.”
Gorton De Mond, regional representative for IFC in Central Asia, said, “Kazakhstan has taken a significant step forward by removing the key barrier to leasing. The new leasing amendments will have a positive impact on investments in the sector.”
The USAID - IFC Kazakhstan office in Almaty, together with IFC’s Southern Europe and Central Asia department, launched the Kazakhstan Leasing Project in fall 2003 with a view to increasing the volumes of leasing transactions for small and medium-sized businesses. The project works closely with Kazakhstan’s parliament and government agencies to create an appropriate legislative environment. It provides training and consulting services to local enterprises and foreign investors interested in leasing. USAID and IFC have also launched a public education campaign to educate private enterprises, financial institutions, and regulatory agencies about leasing. The leasing project marks a new step in IFC’s cooperation with Kazakhstan, which began after the country’s independence.
About IFC
IFC’s mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses. Since its founding in 1956, IFC has committed more than $37 billion of its own funds and arranged $22 billion in syndications for 2,990 companies in 140 developing countries. IFC’s committed portfolio at the end of FY03 was $16.8 billion.
IFC has long been a champion of leasing for developing and transitioning economies. IFC has advised 40 countries on leasing and has invested almost $1 billion dollars in leasing operations in 50 countries over the last 30 years.
About USAID
The U.S. Agency for International Development (USAID) has provided economic and humanitarian assistance worldwide for more than 40 years.
USAID Assistance to Central Asia helps increase opportunities to improve citizens' knowledge, livelihoods, participation, and dialogue in social, economic and political life. Opportunities are increased through:
·
improved primary health care and energy and water management;
·
broader-based, legitimate growth of enterprises and trade, particularly smaller-scale and in agriculture, including necessary policy reforms and deregulation;
·
establishing sustainable microfinance institutions that provide credit and business development services to microentrepreneurs;
·
expanded avenues of political participation in communities and local government through strengthened civil society, nongovernmental organizations, and greater linkages between citizens and their government; and
·
broadened access to and widened dissemination of independent information so that a more informed population can effectively participate in civic life.
