Azerbaijan plans to bring leasing share in GDP up to 3 percent by 2025

Azerbaijan, Baku, April 30 / Trend A. Ahundov /

A long-term strategy of Azerbaijan's economic development for 2011-2025, prepared by the Ministry of Economic Development, envisages bringing the share of leasing portfolio in the country's GDP from 0.5 percent in 2009 to at least 3 percent in 2025.

The deputy head of the Strategic Planning Department of the Ministry İlkin Majidov said this at a two-day conference on Azerbaijani-Turkish cooperation on "Socio-economic development in terms of globalization" in Baku.
According to the draft strategy, the volume of the leasing market in the country in 2009 amounted to $ 215 million. The portfolio is expected to reach $ 3.108 billion by 2025.

It is planned to provide leasing organizations with long-term financial means, to give permission to apply the mechanism of rapid amortization of leasing facilities and to create a specialized leasing fund to achieve these goals.

It is planned to conduct activities to increase the share of leasing as the important financial source in realizing major infrastructure and investment projects in the country and improving technical support for agriculture.

The head of the Azerbaijani Association of Leasing Companies (ALCA) earlier told Trend that the leasing sector in Azerbaijan has sufficient potential, including the areas of activity where is has not found its usage yet, from the simple equipment to the most difficult production line.

"The legislation, regulating the leasing activity, has weak links," he said. "Therefore, we raised the issues to improve leasing legislation. Unfortunately, these issues have not been resolved yet. The imperfect legislation is a" stumbling block" hindering the development of the leasing sector."

He said that the area is developing very limited only in a few segments due to the imperfect legislation. One of the moments of imperfection is the lack of the law "Leasing". The provisions of the Azerbaijani Civil Code, which relate to the leasing activity, do not reflect a range of kinds and types of leasing, which are possible, but are not used in Azerbaijan.

ALCA prepared a draft law "Leasing", which was developed with the participation of international organizations and financial institutions, including the International Finance Corporation, USAID and others.

"The next stage is a presentation of the bill to the appropriate organizations," he said.

ALCA head said that an imperfect mechanism of the VAT taxation (18 percent) should be stressed. As it is known, the goods, imported under lease contracts, were not subject to VAT, until January 2008 but then these benefits were canceled. The mechanism of collecting VAT in leasing was not systematized. As a result, the deal rose in price while rendering the leasing services.

"Therefore, we propose to clearly systemize the VAT system taxation for any working mechanism to be created in this region," he said.

He said that leasing companies lose their obvious advantage in these circumstances compared to the bank loans or purchasing of equipment for cash. The leasing may be the necessary mechanism for the companies in current conditions, including the lack of requirement of additional collateral.

The Association was established by Ataleasing, Unileasing, Muganleasing companies on Oct. 27, 2004 within the IFC project on technical assistance of the leasing development in Azerbaijan.

The project strategy is based on the orders given by President Aliyev following the conference. It is dedicated to the results of the first year of executing the second state program of socio-economic development of regions of the country in 2009-2013.

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