Until 2002, almost all leasing companies in Uzbekistan were established under separate Government Resolutions, which granted individual tax preferences. Presidential Decree #3122 “On Measures for the Future Development of Leasing,” enacted August 28, 2002, created a strong basis for the sector’s growth. This Decree expanded all of the tax benefits available to credit to leasing, thus removing the tax barriers to its growth. The Decree was then followed by more than 40 legislative amendments to the Civil Code, Tax Code, Civil Litigations Code, and the Laws on Leasing and Customs Tariffs between 2002 and 2003. With this substantial overhaul, the legislative framework for leasing in Uzbekistan is now progressive and provides significant incentive for growth in the sector.
Further stimuli to leasing were provided by an April 2004 Government Resolution, which gave lessees the ability to use accelerated depreciation for tax purposes to amortize the leased asset. This additional tax advantage for lessees will further assist small businesses to acquire new equipment and technology for leasing. The Resolution also simplified procedures for registering and accounting for leased vehicles, and reduced the fees levied to use notary writ to repossess leased assets. In April 2006, income from leasing transactions became exempt from income tax until 2009. Amendments enacted on December 27, 2007, provided further incentives to leasing – the Law “On Leasing” and the Civil Code define the lease payment as a sum of the reimbursement by a lessee to a lessor that includes the cost of the leased facility and the interest income of the lessor.
Common trends
In 2007, the leasing sector enjoyed a spectacular 57.7 percent growth per annum, totaling $169.7 million in new leases versus $107.6 million in 2006 (a $62.1 million increase). Domestic leasing penetration (share of assets acquired through leasing in total capital investment) decreased from 4.22 percent in 2006 to 3.9 percent in 2007, although the share of leases in GDP in 2007 increased to 0.76 percent from 0.63 percent in 2006.
Uzsel’khozmashleasing is still the largest lessor in Uzbekistan, with 22 percent of the market share. Encouragingly, the state-owned company, which is financed from a special fund at the Ministry of Finance to stimulate replacement and improvement in agricultural equipment, has seen its market share decline from 38 percent in 2006, as a result of an increase in bank lease operations, emergence of new leasing companies, expansion of business by leasing companies established before amendments in the legislation and entrance to the market of new market players such as credit unions. The number of lessors has grown from 13 in 2002 to 48 by the end of 2007.
Total lease value, $ million
Leased assets
Analysis of the leased assets shows that in 2007 leasing of passenger transport grossly increased from just 7 percent of all leases in 2006 to 17 percent. Production facilities remained constant from 2006 to 2007, at 17 percent. But within this segment, the share of equipment that produces construction materials rose from 6 percent to 10 percent in 2007. Leasing of printing equipment went down from 3 percent in 2006 to less than 1 percent in 2007.
Lease term and leased assets value
In Uzbekistan, the average lease term is up to three years. The average lease size increased substantially in 2007 to $33,200 ($19,100 and $20,000 respectively in 2006 and 2005). Aloqa Bank financed leases that averaged $3 million in 2007. Lessors like Uzbekleasing International, Asaka-Trans Leasing, as well as banks like Alp Jamol, UzKDB, Credit Standard and UzPromStroyBank had average transaction sizes of about $230,000.
