Washington, D.C., July 9, 2003—
Leasing finance just got a significant boost in the Kyrgyz Republic from amendments to the tax code, adopted by the Parliament on March 4, 2003, and signed by President Askar Akaev on June 12. Although the Kyrgyzstan law on leasing was enacted July 23, 2002, this new financial mechanism has scarcely been used because of complexities in the tax code. With the adoption of these amendments today, the Kyrgyz Republic now has a regulatory framework that meets worldwide standards for leasing. This is an important step toward the development of financial markets in the country.
Experts from the Swiss–IFC Partnership Central Asia Leasing Project office in Bishkek and from IFC’s Southern Europe and Central Asia Department had a key role in helping the Kyrgyz government craft the tax legislation. The IMF also gave its approval for these amendments. These amendments do not provide tax holidays; rather, they create an overall tax framework for leasing and remove the inherent discrimination against leasing in the legislation.
Leasing and bank credit are now on a level playing field regarding VAT, and commercial banks providing leasing and leasing companies are on equal footing regarding withholding taxes. The tax amendments also present clear instructions for lease accounting by including international accounting standards for leasing in the Kyrgyz tax code.
“IFC is delighted to have supported the Kyrgyz government in developing the new tax code for leasing, which will contribute to the growth of the leasing industry in the country,” stated Khosrow Zamani, IFC’s director for Southern Europe and Central Asia. “The new legislation will encourage more financial institutions to invest in leasing as one way of providing effective financing to viable small and medium enterprises.”
“I see leasing as an answer to persistent access to capital issues for small and medium businesses in the Kyrgyz Republic. Most of our equipment needs modernizing, and equipment leasing is the mechanism that will enable local businesses to improve efficiencies and grow the economy,” said Temir Sariev, the parliamentary deputy that introduced the tax legislation to the Parliament.
“Several banks including the largest banks in the country have approached IFC about leasing, but the tax legislation has held them back. Now that the tax code is clear, banks like KICB, Ineksimbank, and Demir plan to make major moves in the leasing industry this year,” stated Rachel Freeman, project manager for the Central Asia Leasing Project.
The Swiss – IFC Partnership (
www.ifc.org/centralasia
) was launched in 2001 by the Swiss Secretariat for Economic Affairs and the International Finance Corporation, to promote private sector development in the Central Asian countries of the Kyrgyz Republic, Tajikistan, Uzbekistan, and Turkmenistan. One of the first projects of the partnership is the Central Asia Leasing Project, which is a technical assistance initiative aimed at developing the leasing industry in Central Asia and increasing the volume of leasing transactions. The project works closely with local governments to create an appropriate legislative environment, provides training and consulting services to local enterprises and foreign investors interested in using leasing, and has launched a public education campaign to educate private enterprises, financial institutions, and regulatory agencies about leasing.
About IFC
IFC's mission (
www.ifc.org
) is to promote sustainable private sector investment in developing countries and transition economies, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the emerging markets, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY02, IFC has committed more than $34 billion of its own funds and arranged $21 billion in syndications for 2,825 companies in 140 developing countries. IFC's committed portfolio at the end of FY02 was $15.1 billion for its own account and $6.5 billion held for participants in loan syndications.
IFC has long promoted leasing in developing and transitioning economies. IFC has advised 39 countries on developing leasing and invested almost $1 billion in leasing operations in 50 countries over the past 30 years.
About the Swiss State Secretariat for Economic Affairs
Switzerland participates in the international community’s efforts to help transitional countries build stable democracies and viable market economies. Each year, Switzerland spends approximately SFr1.5 billion on development aid around the world, or about 0.34 percent of its gross national product. This is a testimony to Switzerland’s belief that long-term global security and prosperity can be achieved only by narrowing the gap between developed and transitional countries.
As for the Swiss State Secretariat for Economic Affairs, its economic development cooperation program has four main objectives: (1) to help transitional countries reach the stage of development most favorable to growth and investment; (2) to mobilize private sector resources as a means of increasing the flow of finance to the transitional countries, as well as technology transfer; (3) to improve the productive and social infrastructure; and (4) to achieve greater integration of developing countries in international trade.
