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
“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
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.