Financial Innovation and Minimum Regulation Drives Equipment Leasing; Equipment Leasing Association Kicks Off Five-Day World Bank Workshop.

Business Editors

WASHINGTON--(BUSINESS WIRE)--Feb. 3, 2000

On January 31, 2000, a panel of five experts from the Arlington, Virginia, based Equipment Leasing Association (ELA), chaired by ELA President Michael Fleming, kicked off The World Bank Group's five-day workshop, Non-Bank Financial Institutions: Development and Regulation, with a half-day module on equipment leasing.

The workshop, designed to create awareness among developing countries of the role and operations of non-financial institutions, featured six presentations - Leasing, Insurance, Mutual Funds, Securities Firms, Real Estate and Pensions - all modules focused on constructing solid financial industries, which will be imperative to building strong economies.

More than 200 corporate leaders and developing countries' senior government officials, who determine the fiscal policies and lead their countries toward economic development, attended the workshop.

ELA experts offered an in-depth presentation on the potential economic benefit to countries that establish and build equipment leasing industries. The presentation gave a complete overview of available leasing products, the benefits of leasing, financing opportunities and economic growth potential that countries will enjoy in establishing an equipment leasing industry.

ELA experts stated &uot;as countries set their plans for economic development, the establishment of an equipment leasing industry will be a key ingredient in building a strong vibrant economy. Capital, which is of primary concern to those who are leading the initiatives of economic development, will be created and leveraged through leasing.&uot;

According to Fleming, whether countries lease aircraft, railcars, vehicles, information technology, medical equipment, manufacturing equipment, telecommunications equipment or office equipment, leasing as a financing option will both leverage up their existing capital and create new capital by increasing their cash flow, taking advantage of tax benefits such as deducting the cost of the lease from the users taxes, and transferring costs of upgrading equipment to the lessor.

&uot;However, the benefits of equipment leasing can only be realized in an unregulated environment which essentially levels the playing field and enables the equipment leasing industry to remain customer centric and a tool of financial innovation,&uot; Fleming said.

In an overview of the estimated $500 billion unregulated equipment leasing industry, Fleming outlined the predicted growth figures for this flourishing industry across all seven continents. On several continents, growth in the equipment leasing industry abroad is expected to increase up to 12 percent.

For example, in Europe, growth figures are expected to increase 12 percent, in South America 8 percent and in Australia 9 percent. Equipment leasing has more than doubled in volume in the last 10 years, partially due to open global markets and minimal regulation of the industry.

&uot;As globalization continues, and markets become seemingly borderless, leasing as a financing option will continue to create capital and increase its impact in the global, financial community,&uot; Fleming said.

Robert Sammis, executive vice president of GATX Capital, highlighted the impact of leasing on economic growth and its contribution to the formation of capital.

&uot;For countries looking to expand their capital, the key to their economic prosperity lies in leasing,&uot; Sammis said. &uot;Leasing transfers certain risks associated with capital equipment from the user to the leasing companies that specialize in managing the risks of equipment acquisition.&uot;

While Shephard W. Melzar, partner of the law firm Clifford, Chance, Rogers &Wells, LLP, discussed the risks of global leasing and how to minimize the risks for both the lessee and lessor, ELA member Jay Gillian, vice president of Caterpillar Financial, addressed the topic of the growth of the equipment leasing industry in emerging markets.

Gillian commented that as countries begin to develop and build infrastructure, technological and transportation equipment will be in high demand. In fact, according to a recent State of the Industry Report by the Equipment Leasing and Finance Foundation, these are the fastest growing equipment types.

IBM Global Financing's Vice President of Financial Products and Sales Operations W. C. Doscas highlighted that leasing is an important element of growth, especially in the information technology marketplace. Worldwide, information technology expenditures account for 19 percent of gross domestic product growth.

IBM Global financing reports that international financing volume reached $18 billion in customer financing and $26 billion in commercial financing.

&uot;Developing countries have had great successes in leasing as a strategic approach to furthering their technology and infrastructure. Leasing has provided them a foundation to compete in the global marketplace by enabling them to build their transportation, technology and telecommunications infrastructures while limiting the costs of economic development,&uot; Doscas said.

Cash flow management, tax reduction, 100% financing and the transference of risk are only a few of the benefits these countries will reap. However, according to Fleming, the biggest challenge will be managing the players' policy climates, economic climates, tax system and legal system differences.

Ultimately as cross-border lease agreements become more prominent, local regulation or international convention will require and influence international legislation.

For more information on ELA or the leasing industry, please visit http://elaonline.com

The Equipment Leasing Association of America (ELA) is a nonprofit organization headquartered in Arlington, Virginia. ELA represents more than 800 member companies and provides a variety of asset-based financial products, primarily in equipment leasing.