Over the past 20 plus years, I have had the privilege of visiting over 75 leasing economies throughout the world. Each year, I am fortunate to be consulting, chairing, speaking or teaching in about 20 different countries. Any perspective, therefore, on “the year ahead” comes from my visits; and, in particular, from my conversations with key executives in the countries I visit.

So as to gain the most updated insight I could, I spoke with and wrote to several individuals who I have met during the course of 2008. Before I share their insight with you, let me first give you my own:

• Though demand for new equipment will be sharply lower, demand for equipment finance for lessors will increase as borrowers face tightening liquidity from traditional lenders.
• Higher demand will not lead to higher volume as lessors will face greater difficulty in funding transactions.
• Profitability will generally decline owing to lower volumes spread over fixed costs as well as additional delinquencies arising from a continued business downturn.
• The year ahead will be extremely challenging, forcing management to look into cutting overhead, improving operational efficiencies, seeking new markets, and developing new and meaningful products.
• Overhead will be cut primarily through decreased person power; operational efficiencies will come from streamlining process and investments in outdated IT systems; niche markets will be sought with greater intensity; and operating leases will be introduced in many lease economies to meet lessee needs not met by loan-like finance leases.
• The industry will consolidate with the weak falling by the wayside, and many not so weak ones being acquired by the survivors.

Now, to the more meaningful part – I would like to share the wisdom of individuals who were kind to shed light on what lies ahead. Their edited comments follow:

"Despite being the most potent form of capital creation worldwide, leasing has not yet made a perceptible impact in a cost-sensitive market like India. A lack of clear understanding at the policy-making level about the advantages of leasing and its cost-effective nature has stifled the growth of this instrument as well as the growth of its vehicles i.e. the asset financing, non-banking financial companies. However, with government planning a Big Push in infrastructure to pump-prime the economy, we hope 2009 will be the year when our policy makers will wake up to the true potential of leasing and it will rise like a phoenix to play a catalytic role in India’s economic progress."

“The year of survival and rare opportunity might probably be the blended theme for 2009.

Leasing volumes are likely to decrease about 25% compared to 2008 (which was roughly IDR 50 trillion), causing 2009 to return to 2006/2007 levels. Falling commodity prices and the global financial crunch could partly be blamed for the negative growth in leasing.

However, as Indonesia has once experienced an economic crisis in 1997/1998, the finance companies are generally in a much better position to weather the storm.

While many other countries have entered recessionary periods, Indonesia’s economy, with a strong and big domestic consumption, is expected to achieve more than 4.5% growth in 2009, which will translate into great potential for leasing to prosper.”

“Tunisia is an expanding economy, incredibly healthy, in terms of no speculation, just wonderful fundamental growth, and liquidity is not a problem, neither trust. Some shadows: All foreign companies investing here carry negative economic elements coming from their own countries, but local opportunities do exist.”

“Over the last few months, we have started to feel the effects of the global recession here in Nigeria. We have already seen a collapse of oil prices by almost two-thirds. For an economy dependent on oil like Nigeria, the consequences have been near catastrophic.

The currency has devalued by 20% in the last month, interest rates have risen by 800 basis points and trade import lines are scarce to come by.

In the circumstances, we expect extremely difficult operating conditions with slower growth and rising default rates. But we expect niche players in some market segments to prosper as the tumultuous times will create opportunities for some sectors.”

"The year 2009 is expected to be a challenging year for business in the Philippines, as the full impact of the global financial crisis comes to fore starting in the second quarter. We expect business players to be more prudent in their expenditures, perhaps placing expansionary plans on hold for the meantime. This will definitely put a dent on our leasing volumes. Nevertheless, there are nuggets of opportunities in our services sector, especially in the BPOs, that we can take advantage of."

"The leasing industry in Russia has confronted the most difficult year in its history. Lessors have been forced to solve the issues they have ignored in the fast growing market. The most important issue is to find sources of funding. Large bank lessors will have better chance for success. Another crucial question will be the collection of leasing payments in the business spheres where bankruptcy of 30-40% is anticipated. Also, approaches to sales will be changed since the demand for equipment renovation has decreased dramatically. Liberal tax benefits have been repealed as accelerated depreciation has been abolished for assets with useful lives less than five years. All of the above will force companies to consolidate within the leasing sector in Russia.”

“Despite the general pessimism, the feeling here is that the UAE will withstand this crisis, with Abu Dhabi in the forefront as the strongest of the Emirates.

While the UAE's economy is chiefly oil-dependant, it has substantial investments in infra-structure development, transport and communication sectors, real estate and construction. In its continuing thrust towards making its own identity, Abu Dhabi has put a greater stake into tourism, a move which is sure to generate additional capital requirements.

The steady advancements, in spite of the odds, promise good things for the leasing industry here. The equipment leasing business in particular, shows enormous potential and promise for the year ahead.”

“After a year that will be recognised as the most tumultuous (both politically and economically) in many decades, and which saw the demise of capitalism in its most raw sense, the question being asked in the emerging markets is ‘will our economies catch pneumonia and die or will we get away with a head cold?’

Commodities under-pin our economies and I remain of the view that the latter scenario is more likely. No question; demand will drop off from the developed world in general and the G8 in particular but when one considers that a large proportion of commodity trade occurs between emerging economies, it is clear that opportunities abound and that the possibility of closing the gap between the G20 and the rest of the world has never been more tangible. 2009 will in all probability be one of cautious consolidation and a return to the old adage of ‘cash is king’.

For leasing, market-place education of the benefits of leasing above all else shall be pivotal in growing the sector’s contribution as a percentage of bank assets (it is 7% at present). Concentration risk, particularly in the mining sector will have to be carefully managed but this may drive lessors to begin financing other, as yet untapped sectors such as agriculture and tourism. The importance of local value adding to raw commodities cannot be over-emphasised and this too shall present significant opportunities to lessors to grow manufacturing initiatives.”

Based on the opinions shared by the individuals quoted above, and my numerous conversations with others, it will undoubtedly be a tough and challenging year for most, if not all, emerging leasing economies throughout the world. Fortunately, as most of them are not plagued by America’s debt structural problems, although 2009 will be painful, a recovery is more than likely in 2010 – but not for everyone, only for the resilient!