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Trade with neighboring countries, especially the CLMV group (Cambodia, Laos PDR, Myanmar, and Vietnam), has been strategically leveraged by Thailand to expand markets and create new economic opportunities. Given the significant demand for Thai products among these nations, border trade has become a critical avenue for Thai entrepreneurs to increase exports.
However, in July 2025, a border conflict between Thailand and Cambodia escalated into the most severe confrontation between the two nations in over a decade. Border closures caused by this unrest immediately halted the movement of goods, labor, and services. This incident underscores that border security remains an indispensable factor in international trade.
The conflict led to the displacement of more than 140,000 people, dozens of fatalities, and extensive property damage. This situation highlights the significant challenges to regional cooperation in Southeast Asia and represents a critical test for ASEAN’s capability in managing conflicts between its member states.
Economically, while Cambodia is not Thailand’s largest trading partner, it remains vital for border trade. According to 2024 data, trade between the two countries totaled 366.729 billion baht, with Thailand accounting for 88% of exports and 12% of imports. Specifically, border trade reached 174,530 million baht, with Thailand holding an advantage in exports at 81% versus 19% for imports. These figures illustrate Thailand’s dominant position in bilateral trade, highlighting Cambodia’s reliance on Thai goods. Additionally, Thai businesses have directly invested approximately USD 3,785 million cumulatively in Cambodia, primarily in industry, agriculture, and services.
The closure of border checkpoints disrupted exports and supply chains, affecting production and distribution in several provinces, particularly those heavily dependent on cross-border trade. Businesses, especially small and medium-sized enterprises (SMEs), encountered rising logistics and production costs, coupled with reduced export revenues. Many enterprises were compelled to swiftly adapt to sustain operations amid prolonged uncertainty.
In terms of investment, the conflict has adversely impacted foreign investor confidence, an essential component of economic growth, particularly during periods of domestic economic slowdown. Security has thus emerged as a critical risk factor influencing investment decisions.
The tourism sector also experienced pronounced effects, especially in border regions. Both domestic and international tourists expressed safety concerns, opting to avoid or cancel trips. Consequently, local businesses such as hotels, restaurants, and retail establishments experienced a sudden decline in revenue.
Should the conflict resolve within one to two months, border trade might quickly recover, limiting economic damage and maintaining business competitiveness. However, a prolonged conflict would amplify and extend economic impacts across trade, investment, tourism, supply chains, and labor markets, significantly eroding investor confidence and prolonging recovery even after the conflict’s resolution.
Therefore, the government must proactively implement measures to contain economic fallout, such as establishing emergency mechanisms for border trade coordination among relevant agencies and issuing relief measures for affected businesses. Concurrently, the private sector should formulate risk management strategies for supply chains, including diversified transport routes and inventory management, enhancing operational resilience against future uncertainties.
Author:
Ms. Natjaree Petruang
Researcher
International Institute for Trade and Development (Public Organization)
www.itd.or.th
Publication: Bangkok BIZ Newspaper
Section: First Section/World Beat
Volume: 38 Issue: 12956
Date: Wednesday, Jul. 30, 2025
Page: 8 (bottom-left)Column: “Asean Insight”
