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Leasing Companies to Rival with Banks – Interview with Chairman of the Board of Azerbaijani Leasing Companies’ Association

Business Materials 10 November 2007 12:14 (UTC +04:00)

Azerbaijan, Baku / corr Trend U.Ismayilova / Trend 's interview with Azer Mammadov, the chairman of the Managing Board of the Azerbaijani Association of leasing Companies, and also the chairman of the Managing Board of Ag Leasing company.

Question: How do you estimate the current state of leasing in Azerbaijan?

Answer: If to approach in the right way, leasing will promote surviving the economy from the shadow. I am sure that over 3-5 years the existing leasing companies will rival with the banks for their capacity. I cannot understand the isolation of leasing from the development of Azerbaijan, because leasing in developed countries is used at high level. The same evolution process will be in Azerbaijan.

I also rely on state bodies in the development of leasing. The Government committed the ministries to develop the non-oil sector, small and medium-scale business and it actually implies leasing. Presently, the Government understands that something should be done for leasing. Leasing is guaranteed investment in major capital.

Question: What is the progress with the development of legal base of the leasing market? You have recently stated on your passing upon the development of a new bill on leasing.

Answer: We are for postponing its development, rather passing upon it. The decision was taken due to legislative body's non-readiness to discuss the law which has been recently cancelled. Therefore, we decided to come out with an initiative to inject changes to some articles of the Civil Code, regulating the leasing activities, which is not so bad in reality. The Civil Code enables the companies to carry out leasing activities. The question is that to what extent it contributes in the development of leasing лизинга and definite problem raise in this respect. I think we adopted right tactics in the resolution of our shirt-term tasks through injecting changes in the Civil Code for maximally urgent resolution of the problem.

Question: Did the Association make any concrete appeal to the Government for approval of changes?

Answer: Sure. The Association jointly with the Confederation of Entrepreneurs developed and disseminated proposals to the Cabinet of Ministers and the Parliament. The package submitted to the Cabinet of Ministers stipulates releasing the leasing equipment from VAT. So far, it remains to be the major problem. For instance, the leasing provider pays 18% in VAT for the equipment with the cost of AZN 100. While giving equipment on leasing the company takes into consideration this 18% and plus the company's margin, which results in considerable increase of the cost of equipment, making leasing unprofitable for beneficiaries.

There is also a proposal regarding double taxation. Leasing operations are referred to financial services, released from VAT, whereas VAT is imposed on the sale and purchase of leasing equipment. We propose to cancel it.

The second package of proposals, which was submitted to the Parliament, envisages the preservation of the VAT, but its division during the mutual settlements.

Question: Does the Association establish cooperation with the international organizations for their participation in the leasing market of Azerbaijan?

Answer: The international institutes take much interest in working with leasing companies in Azerbaijan, because they found this sector too profitable. Over the past period the international organizations make more and more proposals to enter the composition of local companies and allocate credit. The Association puts a task that of you want to invest in this sphere, let's try to solve the problem that Azerbaijani leasing market suffers. During the meeting with them при встрече с ним я нахожу понимание и необходимость в проведении этих реформ для развития дальнейшего бизнеса. At present the Association is in talks with the Asian Bank, the European Bank for the Reconstruction and Development and the International Finance Cooperation is the next.

The only surprise for me is that the World Bank did not include the leasing market in the program on upgrade of financial system which is part of the financial system. I appealed them and the issue is in the stage of negotiations.

I do not exclude that the key reason for non-inclusion of the leasing market into the program of the World Bank can be the absence of official regulating body, like the National Bank in banking sector and the State Insurance Control. Azerbaijan in this respect is not original. Many world countries do not have a regulator at the leasing market. If there raise a necessity and a relevant initiative is made, we are prepared to discuss it.

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