2. LEASING IN RUSSIA IS A DEVELOPING BUSINESS WHOSE PROSPECTS DEPEND ON THE CREATION OF THE FEDERAL LEGISLATION WHICH WILL REGULATE THE MARKET. ALTHOUGH THE FIRST LEASING COMPANIES IN RUSSIA WERE ESTABLISHED IN THE BEGINNING OF 1990'S, THE TENDENCY OF RUSSIAN FIRMS TO USE LEASING SERVICES BECAME NOTICEABLE ONLY IN 1994 - 1995. THE GROWING TENDENCY OF RUSSIAN MANUFACTURERS TO UPGRADE THEIR PRODUCTION FACILITIES WITH THE LATEST TECHNOLOGIES, ALONG WITH THE LACK OF INVESTMENT CAPITAL AND EXCESSIVELY HIGH BANK INTEREST RATES (UP TO 160 PERCENT IN ROUBLES PER ANNUM), ARE STIMULATING DEMAND FOR LEASING SERVICES. ACCORDING TO THE NATIONAL ASSOCIATION OF LEASING COMPANIES, LEASING SERVICES IN THE RUSSIAN MARKET ARE IN MOST DEMAND FOR THE FOLLOWING PRODUCTS AND SECTORS:
- SEA AND RIVER VESSELS;
- HIGH TECHNOLOGY EQUIPMENT;
- REAL ESTATE;
- AIRCRAFT;
- AGRICULTURAL MACHINES AND MINI-FACTORIES FOR FOOD
PROCESSING (MILK, MEAT, FRUIT AND VEGETABLES,
ETC.);
- PERSONAL COMPUTERS AND OFFICE EQUIPMENT;
- TRUCKS AND CARS.
3. HOWEVER, THE TAXATION SYSTEM EXISTING IN RUSSIA IN 1994 - 1995 WAS NOT FAVORABLE EITHER TO LEASING COMPANIES OR THEIR CUSTOMERS. IN ORDER TO LOBBY FOR GOVERNMENT REGULATIONS WHICH WOULD SUPPORT THE GROWTH OF THE LEASING BUSINESS IN RUSSIA, THE NATIONAL ASSOCIATION OF LEASING COMPANIES WAS ESTABLISHED IN JULY, 1994. IT THEN INCLUDED 15 LEASING COMPANIES FROM ST.PETERSBURG, MOSCOW, OMSK, TYUMEN AND OTHER RUSSIAN CITIES. BALTLEASE LTD, THE LARGEST RUSSIAN LEASING COMPANY, HAS THE INITIATOR OF THE ASSOCIATION. THE GENERAL DIRECTOR OF BALTLEASE, WHICH IS LOCATED IN ST.PETERSBURG, BECAME PRESIDENT OF THE ASSOCIATION. AT PRESENT, THE ASSOCIATION HAS 19 MEMBERS (SEE CONTACT LIST BELOW). THE ASSOCIATION WAS SUCCESSFUL IN CONVINCING REGULATORY AGENCIES TO EFFECT SOME OF THE CHANGES THE ASSOCIATION BELIEVED WOULD PROVIDE THE BUSINESS. DUE TO THE JOINT EFFORTS OF ASSOCIATION MEMBERS, THE GOVERNMENT HAS DEVELOPED A DRAFT SCHEDULE OF DECREES PROVIDING FAVORABLE TAX TREATMENT TO LEASING COMPANIES AND THEIR CLIENTS. THE FOLLOWING OFFICIAL DOCUMENTS HAVE RECENTLY BEEN SIGNED:
4. ON SEPTEMBER 17, 1994, PRESIDENT YELTSIN SIGNED THE PRESIDENTIAL DECREE "ON DEVELOPMENT OF FINANCIAL LEASING IN INVESTMENTS". IT TOOK THE RUSSIAN GOVERNMENT A YEAR TO PREPARE RECOMMENDATIONS FOR THE MINISTRY OF FINANCE, THE MINISTRY OF ECONOMICS, THE STATE CUSTOMS COMMITTEE, AND OTHER GOVERNMENTAL AGENCIES IN FAVOR OF FINANCIAL LEASING OPERATIONS. ON JUNE 29, 1995, THE GOVERNMENT SIGNED THE ORDER "ON THE DEVELOPMENT OF LEASING IN INVESTMENTS", WHICH PROVIDED THE OFFICIAL GROUND FOR THE FOLLOWING CHANGES IN TAX POLICY: 1. MORE FAVORABLE TERMS FOR LEASING OPERATIONS IN ACCOUNTING REPORTS; 2. RELEASE OF LEASING COMPANIES, BANKS, AND OTHER CREDIT AGENCIES FROM PROFIT TAX IF THE PERIOD OF THE LEASING CONTRACT IS MORE THAN 3 YEARS; 3. RELEASE OF LEASING COMPANIES FROM VALUE ADDED TAX ON LEASING SERVICES; 4. A PARTIALLY WAIVER OF CUSTOMS DUTIES AND TAXES FOR PRODUCTS WHICH ARE LEASED FROM ABROAD AND, CONSEQUENTLY, ARE TEMPORARILY IMPORTED INTO RUSSIA. ALTHOUGH NOW STRUCTURED AS LAW, THESE CAHNGES STILL REQUIRE IMPLEMENTING REGULATIONS TO PUT THEM INTO PRACTICE. THE RECENTLY ISSUED DOCUMENTS (ORDER OF THE MINISTRY OF FINANCE OF SEPTEMBER 29, 1995, AND ORDER OF THE RUSSIAN GOVERNMENT OF NOVEMBER 11, 1995) WILL IMPLEMENT THE FIRST OF THE ABOVE MENTIONED CHANGES: NOW USERS OF LEASING SERVICES CAN INCLUDE LEASING FEES IN THEIR PRODUCTION COSTS, WHICH CONSIDERABLY REDUCES THE AMOUNT OF THEIR PROFIT TAXES.
5. WE MET WITH MR VALERY GOLOSCHAPOV, DIRECTOR GENERAL OF BALTLEASE AND PRESIDENT OF THE ASSOCIATION. BALTLEASE IS THE LARGEST LEASING COMPANY IN RUSSIA. IT WAS SET UP IN JUNE, 1990 BY PROMSTROYBANK (INDUSTRY AND CONSTRUCTION BANK), ONE OF THE LARGEST BANKS IN ST.PETERSBURG. OTHER FOUNDERS OF THE COMPANY INCLUDE THE BALTIC SHIPPING COMPANY; RUSSIAN STATE INSURANCE COMPANY; ASSOCIATION OF INTERNATIONAL PEACE FUNDS; THE INSTITUTE OF RESEARCH ON WHOLESALE MARKETS; AND SCIENTIFIC DEVICES LTD. BALTLEASE OFFERS LEASING OF REAL ESTATE (27.6 PER CENT), VESSELS (40 PER CENT), AIRCRAFT (4.5 PER CENT), VEHICLES (17.2 PER CENT), COMPUTERS (3.8 PER CENT), TECHNOLOGIES AND MACHINE-TOOLS (6.9 PER CENT). BALTLEASE ALSO PARTICIPATES IN FINANCING PROMISING PROJECTS AND ARRANGES INSURANCE OF RISKS AND PROPERTY. ACCORDING TO MR GOLOSCHAPOV, THE RECENT CHANGES IN THE LEGISLATION DESCRIBED ABOVE HAVE ATTRACTED MORE CLIENTS TO LEASING SERVICES.
6. HOWEVER, THE LEASING COMPANIES, EVEN THOSE WITH STRONG FINANCIAL FOUNDATIONS LIKE BALTLEASE, WOULD FIND THEIR POSITION MUCH STRONGER, IF THE MINISTRY OF FINANCE WOULD IMPLEMENT THE REST OF THE ABOVE (PARA 4) PRACTICAL CHANGES IN LEASING-RELATED TAX POLICY. AT PRESENT, A LEASING COMPANY HAS TO PAY THE VALUE ADDED TAX AT LEAST TWICE: ON THE AMOUNT OF THE PURCHASED EQUIPMENT AND ON THE AMOUNT OF THEIR LEASING SERVICES. WHEN LEASING PRODUCTS FROM A FOREIGN COMPANY, THE EXISTING CUSTOMS SCHEME OF TEMPORARY IMPORT FORCES THE LOCAL LEASING FIRM TO PAY 3 PERCENT MONTHLY FOR THE DELAYED PAYMENT OF CUSTOMS DUTIES, AND THE CUSTOMS DUTIES FOR THE TOTAL COST OF THE PRODUCTS WHEN PURCHASING IT AFTER THE LEASING PERIOD IS OVER. ACCORDING TO MR GOLOSCHAPOV, IF THE GOVERNMENT ALLOWS LEASING COMPANIES TO PAY VALUE ADDED TAXES ONLY FOR THE AMOUNT OF LEASING SERVICES, AND TO PAY CUSTOMS DUTIES FOR THE SURPLUS COST OF THE LEASED EQUIPMENT, IT WILL CONSIDERABLY BENEFIT AND STIMULATE THE LEASING BUSINESS. OTHER LOCAL LEASING EXPERTS WHOM WE RECENTLY INTERVIEWED ALSO CONCLUDED THAT LEASING IS AN INDUSTRY WITH HIGH PROFIT POTENTIAL, HAVING POSITIVE PROSPECTS OF FAST GROWTH IN 1996 - 2000, IF THE RUSSIAN GOVERNMENT WOULD PROVIDE THE ALREADY SANCTIONED LEASING- RELATED LEGAL CHANGES IN THE NEAR FUTURE.
7. COMPANIES BACKED UP BY SOLID BANKS FIND THEMSELVES IN A BETTER POSITION EVEN NOW. RUST LTD IS A GOOD EXAMPLE OF NEW BREED OF RUSSIAN FIRM SPECIALIZED IN FINANCIAL LEASING. ALTHOUGH IT WAS ESTABLISHED ONLY IN THE FALL OF 1995, THE FIRM HAS A LONG LIST OF CLIENTS. RUST HAS ESTABLISHED AND IS 100 PERCENT OWNED BY A ST.PETERSBURG BRANCH OF THE SAVINGS BANK OF THE RUSSIAN FEDERATION, WHICH IS ONE OF THE MOST HIGHLY RATED RUSSIAN BANKS. RUST'S CLIENTS ARE LOCAL COMPANIES WISHING TO PURCHASE INDUSTRIAL EQUIPMENT, TRANSPORT VEHICLES, COMPUTERS, AND OTHER GOODS ON CREDIT TERMS. IN FACT, THE CONTRACT TERMS WHICH ARE PROPOSED BY RUST ARE VERY CLOSE TO THE CREDIT TERMS OF ANY FINANCING ORGANIZATION: THE GOODS REQUIRED BY A LOCAL CLIENT ARE PURCHASED BY RUST FROM A SUPPLIER (INCLUDING FOREIGN SUPPLIERS) AND THEN LEASED TO THE CUSTOMER FOR A PERIOD OF UP TO 5 YEARS.
8. RECENTLY, MOST OF RUST'S CLIENTS HAVE BEEN INTERESTED IN LEASING IMPORTED EQUIPMENT VALUED IN HARD CURRENCY. THE REASON FOR THIS IS A RECENT STABILIZATION OF THE RUSSIAN CURRENCY IN THE "CURRENCY CORRIDOR", ON ONE HAND, AND A CONSIDERABLE DIFFERENCE IN BANK LOAN INTEREST RATES FOR HARD CURRENCY AS OPPOSED TO ROUBLE LOANS (ABOUT 30 AND 130 PERCENT PER ANNUM RESPECTIVELY). SINCE LEASING RATES ARE BASED ON BANK INTEREST RATES, THE CLIENT FINDS IT MORE REASONABLE TO LEASE GOODS PURCHASED FOR HARD CURRENCY FROM ABROAD THAN THOSE OFFERED BY LOCAL SUPPLIERS.
9. FINANCIAL LEASING OFFERED BY SUCH COMPANIES AS RUST IS MORE ADVANTAGEOUS TO A LOCAL CLIENT THAN A LOAN DUE TO A FLEXIBLE FINANCING SCHEME. ACCORDING TO THE PARTIES' AGREEMENT, A CLIENT CAN MAKE LEASING PAYMENTS AFTER SALES OF GOODS PRODUCED WITH THE LEASED EQUIPMENT, OR THESE PAYMENTS CAN BE SUBSTITUTED BY VARIOUS SERVICES, WHICH WOULD ALLOW THE CLIENT TO RENEW ITS PRODUCTIVE ASSETS WITHOUT AN EXCESSIVE FINANCIAL STAIN. IT IS ALSO VERY IMPORTANT THAT LEASING PAYMENTS ARE CONSIDERED TO BE PRODUCTION EXPENSES AND, CONSEQUENTLY, NOT INCLUDED IN THE PROFIT CALCULATIONS SUBJECT TO PROFIT TAX.
10. LEASING COMPANIES OFFER ANOTHER ADVANTAGE. IN CASES IN WHICH A BUYER AND A SELLER HAVE REACHED AGREEMENT ON ALL BUT PAYMENT TERMS, A LEASING COMPANY CAN ACT AS AN INTERMEDIARY, PROVIDING BOTH CREDIT TO THE BUYER AND UP-FRONT PAYMENT TO THE SELLER. THE BUYER NORMALLY HAS ALREADY CONDUCTED NEGOTIATIONS WITH THE SELLER, AND THE ONLY OBSTACLE TO A DIRECT SALES DEAL IS THE SELLER'S UNWILLINGNESS TO PROVIDE CREDIT TERMS AND THE BUYER'S INABILITY TO MAKE AN ADVANCED PAYMENT. ACCORDING TO MR RYBAKOV, DEPUTY DIRECTOR OF RUST, 1996 - 1997 WILL BE A PERIOD WHEN ANY WELL- ESTABLISHED FINANCIAL ORGANIZATION WITH ACCESS TO FUNDING WILL TEND TO ESTABLISH ITS LEASING DEPARTMENT.
11. CONTACT INFORMATION:
ASSOCIATION OF RUSSIAN LEASING COMPANIES BALTIC LEASING VALERY GOLOSCHAPOV, DIRECTOR GENERAL 40, ANGLIYSKY PR., ST.PETERSBURG, 190008, RUSSIA TEL: 7-(812)-114-4171; FAX: 7-(812)-114-4203
RUST LTD MIKHAIL RYBAKOV, DEPUTY DIRECTOR GENERAL 2, ROOM 335, UL.KRASNYKH TEKSTILSCHIKOV, ST.PETERSBURG, 190000, RUSSIA TEL: 7-(812)-271-8984; FAX: 7-(B12)-329-9667
PETROLEASING YEVGENY SIMANOVICH, DIRECTOR GENERAL 25, UL.KALYAYEVA, ST.PETERSBURG, 191194, RUSSIA TEL: 7-(812)-567-2131
SZM LEASING VALERY KARPENKO, DIRECTOR GENERAL 43, UL.BOLSHAYA ZELENINA, ST.PETERSBURG, 197110, RUSSIA TEL: 7-(812)-235-1355; FAX: 7-(812)-230-3995
"RUSSIA" TRADE LEASING COMPANY OLEG ASHMASOV, DIRECTOR GENERAL 4, UL.KOVALIKHINSKAYA, NIZHNY NOVGOROD, 603003, RUSSIA TEL: 7-(8312)-369-986; FAX: 7-(8312)-366-759
DALENA BANK YURY MONAKHOV, DIRECTOR GENERAL 23, SHOSSE ENTUZIASTOV, MOSCOW, 111024, RUSSIA TEL: 7-(095)-273-8646; FAX: 7-(095)-273-2226
MOSCOW LEASING COMPANY YURY GLADIKOV, DIRECTOR GENERAL 2, SHMIDTOVSKY PROEZD, MOSCOW, 123242, RUSSIA TEL: 7-(095)-256-3021; FAX: 7-(095)-256-8164
SIBIRSKY LEASING LTD YURY LEONICHEV, DIRECTOR GENERAL APT.54, 7A, UL.PUTILOVA, OMSK, 644092, RUSSIA TEL: 7-(3812)-150-369; FAX: 7-(3812)-563-980
RUSSIAN-AMERICAN INVESTMENT BANK BILL KINAN, FINANCIAL DIRECTOR 10/9, UL.BOLSHAYA POLYANKA, MOSCOW, 121170, RUSSIA TEL: 7-(095)-258-2650; FAX: 7-(095)-258-3663
MEZHSBER-YURASKO-LEASING MIKHAIL YEPIFANOV, DIRECTOR GENERAL 17, UL.SKAKOVSKAYA, MOSCOW, 125040, RUSSIA TEL: 7-(095)-245-1545; FAX: 7-(095)-246-1721
ROSLEASING
VYACHESLAV CHULYUKOV, DIRECTOR GENERAL 46, ROOM 417, 5 PARKOVAYA, MOSCOW, 105425, RUSSIA TEL/FAX: 7-(095)-165-2774
URALS LEASING COMPANY LEONID PROSTOKISHIN, DIRECTOR GENERAL 15, UL.ANTONA VALEKA, GSP 982, EKATERINBURG, RUSSIA TEL: 7-(3432)-519-833; FAX: 7-(3432)-586-806
INFRAPORTSERVIS YURY BOYKO, DIRECTOR GENERAL 8, LUZHNETSKAYA NAB., MOSCOW, 119871, RUSSIA TEL: 7-(095)-203-5061; FAX: 7-(095)-248-0814
LEASINGBUSINESS LTD
NIKOLAY KULESHOV, DIRECTOR GENER
AL 49, UL.ARKHITEKTORA VLASOVA, MOSCOW, 103780, RUSSIA TEL: 7-(095)-120-0212; FAX: 7-(095)-120-1101
PROMSTROYLEASING LTD ALEKSEY PIRUMOV, DIRECTOR GENERAL 10, FLOOR 16, BOLSHAYA SADOVAYA, MOSCOW, RUSSIA TEL: 7-(095)-209-1418; FAX: 7-(095)-209-2385
INTERROSLEASING LTD ALEKSEY AKINDINOV, DIRECTOR GENERAL 2, LENINGRADSKY PR., MOSCOW, 117936, RUSSIA TEL: 7-(095)-955-0108; FAX: 7-(095)-955-0102
VOSTOK-ZAPAD INVESTMENT BANK ALEKSANDR VOYTENKOV, DIRECTOR GENERAL 8, BOLSHAYA SADOVAYA, MOSCOW, 103379, RUSSIA TEL: 7-(095)-209-9442; FAX: 7-(095)-209-9570
DALLEASING LTD NIKOLAY NIKITIN, DIRECTOR GENERAL 1, UL.SELSKAYA, VLADIVOSTOK, 690080, RUSSIA TEL: 7-(4232)-294-012; FAX: 7-(4232)-293-244
AEROLEASING STANISLAV OVCHARENKO, DIRECTOR GENERAL 37, LENINGRADSKY PR, MOSCOW, 125836, RUSSIA TEL: 7-(095)-155-5316; FAX: 7-(095)-151-3431
LEASINGUGOL VITALY STEPANOV, DIRECTOR GENERAL 2, 2 ZACHATYEVSKY PER., MOSCOW, RUSSIA TEL: 7-(095)-210-4191; FAX: 7-(095)-201-4839
(FCS ST PETERSBURG/DRAFTED:MKAMAYEVA/CLEARED:DSCHNEIDER)