In Azerbaijan Atalizing plans to conclude new deals with the foreign companies on subleasing, which envisage the delivery of equipment for leasing beneficiaries of the Azerbaijani companies. In this case the necessary technologies are purchased directly by the foreign leasing companies. Atalizing plans to conclude agreements with three companies from Turkey and Russia with the budget of $250,000 and term of 3 years.
Taking into consideration the profitability of subleasing, the number of leasing operations is expected to reach 60, while at the moment the companies are considering the opportunities for implementation of 30 operations. The interest rates for leasing of equipment is no less than 12%, as the lower rates will be unable to cover the companys expenses.
The analysis of the local leasing market enabled to reveal important tendencies in the alternation of the structure of the market. It was revealed that the leasing in the transport sector led in growth pace of leasing - 34%. It is followed by construction - 21%, 12% - agriculture, 6% - civil construction, 5% - financial sector and insurance, 4% - foodstuff production, 3% - medicine, 2% - wholesale trade, tourism and service sector, 1% - production and mining industry.
The necessity for urgent application of the leasing in agriculture is obvious. In accordance with the researches of the Agriculture Ministry, today the technical park privatized after the reorganization of collective and soviet farms (kolkhoz and sovkhoz) is by 90% physically and morally outdated. As of specialists estimations, till 2015 the country will need to renew 30,000 tractors, 25,000 lorries, 4,000 grains harvesting machines, 1,500 forage harvesters and 2,100 cotton harvesting combines. So, approximately $468m is required for replacement of this technique.
In accordance with the presidential decree dated October 2004, there was established state stock company Agrolizing, which is committed to transfer leasing or sell agriculture technique to farmers, cooperatives and other subjects of agrarian sector on privileged terms without attraction of mediators.
Special workshops on leasing for entrepreneurs in the regions are organized by the Association of Leasing Companies of Azerbaijan jointly with the Ministry of Economic Development. The first seminar of the kind was held by the IFC in Ganja jointly with the Ganja Association of Entrepreneurs, the second in Sumgayit jointly with the Ministry of Economic Development, the third in Shaki-Zakatala region.
Leasing has brad perspectives in Azerbaijan. The analysis of major economic indicators testifies for significant potential of this sector. Thus, if as of 1 January 2004 the lasing portfolio of the companies made up $2.5m, in January 2005 the figure was $10m (as of IFC data), actual rise of the leasing sector was fixed at 400%.
Toe IFCs forecasts, over the nearest 2 years the amount of leasing operations in Azerbaijan can attain $400m. The forecasts will be reinforced by official data on import ad amount of investments of put in the major capital.
The expansion of leasing activities in Azerbaijan and perspectives for the upgrade of this sector makes actual the discussions on the level of government over establishment of a body on regulating leasing activities within one of the Ministries. The new establishment can be established at the Ministry of Finances or the National Bank of Azerbaijan.
At the same time the relevant bodies investigate the efficiency of measures on the application of accelerated amortization, expansion of the list of VAT-released import leasing equipment with respect to back the activities of the leasing companies on the state level.
The Association of Leasing Operations of Azerbaijan submitted to the Azerbaijani government proposals on the development of leasing program which will enable the government to forecast the incomes from the development of leasing market. The Association wants to assure the government that the leasing financing is the bets mechanism to raise the economic activity of the country.
A special commission will be established with the participation of Ministry of Taxes, the State Customs Committee and the International Financial Corporation for conduct of necessary calculations.
The essence of the forthcoming work is the improvement of the mechanism on collection of VAT from the leasing companies. Definite resolutions are taken to study the changes to the Tax Code by 2007. The key task of the interdepartmental commission include convince the government that reducing the VAT collection from the leasing companies the government will increase its profits from implementation of the leasing operations by 2-3 times. Starting from 2006 the tax will collected at the rates of 10% of the margin.
The Association urges that the government should continue taking measures for the development of leasing companies, as shortly the Russian and Kazakh leasing companies will enter the market. At present leasing terms offered by these companies are more reasonable than local companies, which is sure to shape high rivalry in the domestic market.