Person:

Yarrow, Richard

The 2025 border conflict between Cambodia and Thailand brought great disruptions to both countries: nearly a million migrant workers were displaced, oil and agricultural goods had to be rerouted, and border closures interrupted daily life and supply chains. The impact on Cambodia so far appears milder than might be expected for a small economy that depended on trade and labour flows with its larger neighbour. In the last 10 years, Cambodia pivoted towards trade and investment with China and Vietnam, with the United States as the leading export destination. In 2022, Thailand fell from being Cambodia’s second-largest to its third-largest source of imports. Cambodia had relied on trade with Thailand in several key product areas, especially fuel, vehicle parts, and agricultural processing. Industrial machinery and intermediate goods trade quickly rebounded, while fuel and agricultural trade pivoted to other regional suppliers. Other areas of bilateral trade appear to be in structural decline. The conflict worsened incomes for migrant workers and border area farmers and businesses. Cambodia’s economy has continued to grow, buttressed by foreign investment and manufacturing growth around Phnom Penh and in the southeastern provinces. The conflict’s limited economic effect on Cambodia may reflect: the versatility of trade for small open economies with sea access and multiple neighbours; the geopolitical benefits of investments from larger economies; and the limits to geoeconomic tools among regional states. Cambodia’s future growth depends on how it stabilises displaced workers’ finances, diversifies and upgrades its industrial base, and fosters new growth drivers in its western provinces.