Tashkent, December 13, 2002
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Financing options for small and medium businesses in Uzbekistan have improved considerably through sweeping changes to legislation regarding leasing. At the December session of Parliament, parliamentarians voted for amendments to the Civil Code, Tax Code, Law on Leasing, and Law on Customs Tariffs to create a progressive legal climate for leasing in Uzbekistan. These amendments were developed with the support of the Swiss—IFC Partnership Central Asia Leasing Project office in Tashkent, Uzbekistan and IFC’s Southern Europe and Central Asia Department. The European Bank of Reconstruction and Development (EBRD) also assisted in developing these amendments through a legal technical assistance project, which is funded by the Government of Japan. IFC is the private sector arm of the World Bank and has worked in Uzbekistan since its independence.
These extensive amendments resolve all the barriers to leasing in Uzbekistan including removing the bar on leasing operations to raise debt financing and addressing a number of tax disadvantages and discrepancies. The amendments achieved two major goals: (1) They incorporated into the Tax Code and Law on Customs Tariff changes introduced in the presidential decree on leasing issued August 28, 2002; and (2) they clarified the roles and responsibilities of the lessor, lessee, and supplier in a lease, providing a clearer framework for lease operations. The legislation also removed all mention of operating leasing from the Law on Leasing, thereby resolving many of the contradictions and inconsistencies in the prior legislation. The new legislation also highlighted leasing’s role as an investment mechanism, equating it with bank credit and other financial mechanisms. These changes have set a strong foundation for leasing in Uzbekistan, making leasing a significantly more attractive financial tool, particularly for small and medium businesses.
Deputy Prime Minister Rustam Azimov wrote in a letter to IFC Executive Vice President Peter Woicke, “The legislative changes will support the development of a healthy industry facilitating the country’s economic development. We expect substantial growth in leasing from commercial banks, the existing six leasing companies, and new leasing companies. This will bring significant expansion in access to financing for small and medium-sized business.”
Gorton De Mond, regional representative for IFC Central Asia, congratulates Uzbekistan. “Uzbekistan has taken a significant step forward by amending the leasing legislation. These legislative changes have created a progressive legislative framework for leasing in Uzbekistan and should have a positive impact on investment in the sector, both from IFC and from other private investors in the leasing sector,” he said.
IFC and EBRD have worked in the leasing sector in Uzbekistan since 1995, serving as one of the founding shareholders in the first leasing company there, Uzbek Leasing International. As a show of support for the legislative amendments, IFC recently approved a US$2.5 million loan and EBRD a loan of US$2.0 million to Uzbek Leasing International to increase the company’s available lease capital.
IFC and EBRD have worked steadily with the Uzbek government to amend the existing law on Leasing and other legislation concerning leasing. This work became more intensive with the addition of extensive on-the-ground support for the law from EBRD’s advisory services on leasing provided under EBRD’s Legal Transition Programme and from the Swiss – IFC Partnership. The Swiss – IFC Partnership was launched in 2001 by the Swiss Secretariat for Economic Affairs (SECO) and the International Finance Corporation (IFC), to promote private sector development in the Central Asian countries of 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 volumes 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 is to promote sustainable private sector investment in developing countries to help reduce poverty and improve people's lives. IFC fulfills its mission through financing private sector ventures in partnership with private investors and through technical assistance and advisory services to governments in partnership with donors. Established in 1956, IFC is the largest multilateral investor in emerging markets. To date, 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 FY01 was $15.1 billion.
IFC has long been a champion of leasing for developing and transitioning economies. IFC has advised 35 countries on developing leasing, and invested almost $1 billion in leasing operations in 50 countries over the past 30 years.
About SECO
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 SECO, 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; (4) to achieve greater integration of developing countries in international trade.
About EBRD
The EBRD aims to foster the transition from centrally planned to market economies in central and eastern Europe and the Commonwealth of Independent States. It is owned by 60 countries, the European Investment Bank and the European Community.
The EBRD is the largest single investor in the region and mobilizes significant foreign direct investment beyond its own financing. The Bank invests mainly in private enterprises, usually together with commercial partners.
Working with €20 billion operating capital, the EBRD provides project financing for banks, industries and businesses, both new ventures and investments in existing companies. It also works with publicly owned companies, to support privatization, restructuring state-owned firms and improvement of municipal services. The EBRD actively supports leasing in its countries of operation through direct loans, equity investments, and vendor financing schemes. The EBRD also has a Legal Transition Programme, the aim of which is to improve the investment climate in the Bank’s countries operations through assisting in the creation of an investor friendly, transparent and predictable legal environment. The development of leasing is a critical component of every country strategy within the Bank, and the Bank’s leasing portfolio has grown substantially over the last year.
