« Tendencies and perspectives of development of Uzbekistan leasing market » Z.B. Mustafaev

1. «Tendencies and perspectives of development of Uzbekistan leasing market» Z.B. Mustafaev General Director of Uzbekistan Lessors’ Association II ANNUAL INTERNATIONAL CONFERENCE September 21-23, 2011.

2. Agenda • Macroeconomic indicators of Republic of Uzbekistan during independence years • Leasing sector of Uzbekistan: current state and perspectives of development • Case study: analysis of development of leasing sector by example of “Uzbek Leasing International A.O.”

3. Republic of Uzbekistan Location:Central Asia Neighboring countries: Turkmenistan, Afghanistan, Kazakhstan, Kyrgyzstan, and Tajikistan. Population: More than 28 million. Main export commodities: cotton,foodstuff, chemical products, natural gas,plastic material and goods from plastic,metal, automobiles, equipment and others.

4. 1. Sustained high rates of economic growth (7-9% per annum on average),fueled mainly by the internal factors, have been provided: Major outcomes of economic reforms in Uzbekistan

5. 2. Macroeconomic stability, internal and external balance of the economy have been ensured: Major outcomes of economic reforms in Uzbekistan Foreign trade balance (USDmln.)

6. 3. Expansion of export potential and diversification of export structure: Major outcomes of economic reforms in Uzbekistan

7. Major outcomes of economic reforms in Uzbekistan Share of main sectors of economy in GDP (in % to GDP)

8. Dynamics of leasing share in GDP and in total capital investments

9. Leasing sector tendencies

10. Dynamics of lease operations development for 1996-2010 years. * One-time operation on leasing 4 aircrafts by National bank of Uzbekistan for Foreign Economic Activity is not included mln. USD

11. Dynamics of lease portfolio Billion UZS

12. Stages of development of leasing market in Uzbekistan from 1991 to 2010 years 1st stage: 1991 -1999 years. Implementation of international mechanisms and formation of legal base for lease operations. 2nd stage: 1999 -2005 years. Improvement of legal base for lease operations and establishment of leasing market. 3rd stage: 2005-2010 years. Popularization of leasing andformation of competitive environment in leasing market.

13. What are the benefits of leasing in Uzbekistan? • Leasing equipment is exempted from VAT and customs fees • Lease object is exempted from paying property tax • Lease payments are exempted from paying VAT • Decrease of taxable amount of turnover to the amount of payable interest • Leasing service ventures are exempted from paying profit tax until January 1, 2012 year

14. Inflow of private and foreign capital into the leasing market Number of leasing companies

15. Structural reorganization of lease objects

16. Distribution of lease transaction by types of fixed assets 2011 year

17. Distribution of lease transaction by types of technological equipment 2011 г.

18. Uzbekistan Lessor`s Association Established in 2005 • Advocate member interests in interaction with government authorities; • Cooperation in elaboration of legislative base regulating lease services; • Assistance in business activity of entrepreneurs by means of promotion leasing services; • Facilitation of professional development of members; • Currently, there are 33 members of Association: • - 24 leasing companies; • - 9 commercial banks

19. Proposals by Association on improvement of the legislation base of leasing services • In Civil Code and Law on Leasing – implementation of secondary leasing mechanism; • In Law on Leasing – specify that lease object can be accounted on balance of Lessee except when Lessee is private entrepreneur; • In Law on Leasing – expand the types of pledge securities as provision under leasing projects; • Subordinate legislation – consider back-lease not as realization of property

20. Top list by first half of FY2011 Top 5 Leasing Companies • Uzqishloqxujalikmashlizing (66,6 billion sums) • Uzavtosanoatlizing (30,6 billion sums) • Uzmeliomashlizing (19,1 billion sums) • Uzbek Leasing International (18,4 billion sums) • Qurilishlizing (8,9 billion sums) Top 5 Banks • Microcredit bank – 26,4 (billion sums) • Aloqa bank– 23,7 (billion sums) • Asaka bank – 11,9 (billion sums) • Ipoteka bank– 9,0 (billion sums) • Khamkor bank– 6,1 (billion sums)

21. Ассоциация лизингодателей Узбекистана More than 150 participants from 15 countries World Bank, IFC, ICD and others. For more information:www.tilf.uz

22. Reasons for decreased volumes of leasing services • Limited access to funding sources both in national and hard currencies; • Leading rates of GDP increase; • Implementation of custom duties on special construction vehicles; • Insufficient pledge property of leasing companies for provision under bank loans security • Strong competition among leasing and bank loans

23. Shareholders: • EBRD • IFC • Maybank • (Malaysia) • NBU

24. Uzbek Leasing International A.O. • First Leasing Company • Operations on the leasing market since 1996 • Solid shareholders • Application of international standards in accounting and operational activity • Over 400projects were successfully financed for total amount of 70 millions of US dollars • Internal funds, credit lines from NBU, Maybank, IFC, EBRD, ICD, bank Asaka and export-credit agencies

25. Lease portfolio of Uzbek Leasing International A.O.

26. Sectors of economy financed by Uzbek Leasing International A.O.

27. Prerequisites for development of leasing sector Existing demand for mini technology by SMEs Modernization, technical and technological improvement of industrial sector such as: machine-building, chemical, oil/gas and others. Development of sectors with high potential to grow and potential export volumes such as: electro-technical, textile, food processing, tourism and etc. Realization of transport-communication projects, construction and reconstruction of road infrastructure, development of roadside infrastructure contributes to increase of leasing volumes in such spheres as: motor vehicle, special vehicle, road construction machines and others. Existing tax benefits

28. Our address: 4th Floor, International Banking & Finance Center 1, Beshyogoch Street Tashkent, 100066 Republic of Uzbekistan Tel.: (+998 71) 120-02-02 (+998 71) 140-77-44 (+998 71) 140-77-46 Fax.: (+998 71)140-37-74 E-mail: info@uzbek-leasing.com www.uzbek-leasing.com www.ula.uz

29. Thank you for attention! www.ula.uz