Economic relation



The introduction of the New Economic Mechanism in 1986 leaded to the acceptance of the role of the market and opening up to foreign capital in Lao People’s Democratic Republic (LNDK). After the disintegration of the socialist camp – instead of the former socialist oriented market – the Lao economy has been open to Asian and Western European markets, which required a complete overhaul of our well-known former way of thinking and practice. 

It was a decisive to Laos to become a full member of ASEAN in July in 1997. In 2008 Laos joined ASEAN Free Trade Area of (AFTA), as a member it undertook to reduce the duties to and between 0 – 5% in the case of 95% of the imported goods and services between 2008-2015, while in the event of the most sensitive products they will be dismantled by the end of 2018. 

In 2013 Lao PDR joined the World Trade Organization (WTO) and the ASEAN Economic Community (AEC) in 2015. 

The country, which is not yet integrated into the world economy, has been less affected by the financial and economic crisis, 7-8% per year of GDP growth can be expected in the coming years (behind China, it is the second fastest growing GDP in the region). Due to the reform process the Lao leadership has succeeded in economic development and improving the standard of living which made the objective realistic to make Laos get out of its category (LDCs – Least developed countries) by 2020. The reality of goals bases on the electricity generation which provides for sustained export earnings to Laos in longer terms, large-scale hydroelectric power plant construction investment and priority development of agriculture which still plays a major role in the country’s economy. 

Bilateral trade between Laos and Hungary is at a rather low rate. The value of recent import activity did not exceed a few ten thousand US dollars annually. Export activity reached its highest in 2010 when the Hungarian export value was 4,9 million US dollars due to the realization of tied aid loan projects. After this the Hungarian export to Laos fell back to its previous insignificant level but shows an increasing tendency: 13.000 USD in 2011, 21.600 USD in 2012, 73.800 USD in 2013, then in 2014 it increased to 403.100 USD.

In Laos the most important agricultural products include rice, corn, coffee, and in animal breeding buffalo, beef, pork and poultry flocks deserve attention.
The primary area of bilateral economic relations is agriculture. This is mainly due to the fact that several Lao leaders in the agriculture sector was educated in Hungary. Agricultural cooperation between Laos and Hungary has a long history. Due to the similar nature of the two countries – which are favorable for agriculture – Laos heavily relies on Hungarian experience in agriculture, animal husbandry and food production.
In 2009 a frame agreement was signed on a tied aid loan offer worth 8.6 million USD, which included the reconstruction and upgrading of small farms and the establishment of feed mills and a slaughter house. The program supported the development of the supply chain for small-scale farms in Laos with good quality animal feed and bloodstock. The projects were successfully completed by 2011. Based on the request from the Lao side Hungary is ready to provide additional tied aid loan worth 30 million USD and an export credit loan worth another 30 million USD, which loans aim at further developments in the agricultural and food industry sector in Laos.

Major Economic Agreements

On July 2014 the Hungarian National Trade House opened its representative office in Vientiane where a showroom was setup in May 2015.