EACH MONTH, MARGARET WALDREN REPORTS ON THE WORK OF EUROPEAN
LEASING ASSOCIATIONS. THIS MONTH, SHE REPORTS FROM SOFIA ON A
CONFERENCE HOSTED BY THE BULGARIAN LEASING ASSOCIATION
Faced with EU cash injections and evidence that the East is
catching up with the West, in principle, a bright future awaits
lessors in the CESEE
Some of the Central, Eastern and South- Eastern Europe (CESEE)
countries are no longer the emerging markets they recently were and
their leasing business volume rivals – indeed, sometimes exceeds –
that of Western European countries of a similar size. Other CESEE
countries are still immature markets, but are fast developing.
Leaseurope’s CESEE working group chairman Brigitte Jancik – in
her welcoming remarks at Leaseurope’s 2008 Seminar for Lessors
in the CESEE, held mid- April in Sofia – highlighted this mix
and referred to “a universal leasing industry in many guises”. She
also stressed it is an industry of which “each one of us is a
part”. She added: “And because [of this], we are all connected to
one another. Whatever happens to one of us, in some way affects all
Hosted by the Bulgarian Leasing Association, the seminar, which
focuses on the sharing of experiences and knowledge, and on giving
advice, attracted about 120 delegates from 22 countries.
Leaseurope chairman John Bennett focused on some positives that
have arisen from the credit crunch, including the fact it has meant
more leasing companies are being put up for sale and that new
opportunities have emerged for lessors to acquire new
Bennett added he did not think that lessors are “running towards
a common marketplace”, although he highlighted significant issues
that are emerging at a European level – Basel II, accounting
standards and a common corporate tax.
Meanwhile, “think globally, but act locally and when in Rome, do
like the Romans do”, was the succinct message from Nikolay Marev,
managing director of international operations at Merkantil Bank
(the asset finance business of OTP Group). He qualified this by
cautioning that a business should never forget its objectives and
should be prepared to enter a new country or beat a hasty
Marev identified several issues facing the CESEE region,
● Leasing regulation and supervision, and other relevant
legislation, plus the role of leasing associations that start
fragmented, but become unified and consolidated.
● The quality and reliability of statistics: poor (Ukraine),
incomplete (Serbia, Bulgaria), good (Romania, Croatia) or good and
reliable (CE countries) and alternative sources of market data.
● Tax regulation and cooperation with the tax authorities.VAT
recovery is always an issue and the time to collect may vary from
one to two months, to six months in Russia.
● IT leasing applications.The issues include local maintenance
and upgrades; statutory tax, accounting and statistics reports;
front- and back-office integration; language – alphabets,
characters, etc. Countries with good local solutions are Romania,
the former Yugoslav republics, Hungary, Slovakia and Russia.
Martin Kofron, president of the Czech Leasing and Finance
Association, said an unregulated leasing market provides sound
conditions for the strong and stable development of leasing. Market
consolidation, he added, is also at a similar level in unregulated
jurisdictions because it is in regulated markets.
Andrzej Krzeminski, vice president of the Polish Leasing
Association, said Poland has been the beneficiary of two stages of
the EU’s cohesion policy on structural assistance. For 2004-06,
Poland received €12.8bn, 6 per cent of total EU assistance for that
period, and during 2007- 13, Poland will receive a net sum of
€67.3bn, almost 20 per cent of EU designated funds.
Most of the funding for 2007-13 will boost investment and will
be directed at operational programmes for infrastructure, and also
development and regional operational programmes. The Ministry of
Regional Development, Ministry of Agriculture and local government
have been earmarked funds for leasing. Public money must be spent
solely on capital, therefore other costs related to a leasing
agreement, such as tax, interest and insurance, are excluded.
There is, however, a time bomb for leasing within the EU support
initiatives. Lease rentals (monthly invoices) constitute eligible
expenditure, but can only be accepted for repayment during the
period of the subsidy programme. Given that the average leasing
contract is 36 months, the last leasing agreement to be subsidised
must be signed by end 2010. The Polish leasing industry has
identified a way around this by making the purchase of an asset by
the lessor the eligible expenditure and for the lessor to receive
the subsidy. There is, however, a risk in that, if the subsidy is
clawed back and the beneficiary is unable to repay, the government
has the right to repossess the asset.
2007 NEW BUSINESS AND TRENDS
Bulgaria (+60 per cent),
Romania (+51 per cent), Serbia (+77 per cent), Croatia (+13 per
cent). Vehicle leasing dominates, 65-70 per cent; equipment leasing
is growing; real estate leasing is relatively undeveloped, with the
exception of Croatia; boat leasing is important in Croatia.
Hungary (+20 per cent),
Slovakia (+19 per cent), Czech Republic (+21 per cent), Poland (+54
per cent). Vehicle leasing dominates, 65-70 per cent, but growth is
slowing; equipment leasing is growing faster, instead; real estate
leasing is increasing and closing the gap with Western Europe,
except in Slovakia.
Russia (+145 per cent),
Ukraine (+437 per cent). In Russia, equipment leasing is dominant
and rail leasing is significant; the Russian market is expected to
grow by at least 40 per cent
over the next three to four years; Ukraine has massive potential
and a little more than half the market is rail leasing.