The Economic Fallout from the Thailand-Cambodia Border Conflict

The latest ceasefire agreement signed by Thailand and Cambodia has led to a cessation of armed border conflict between the two countries since 27 December 2025. The border conflict, which re-ignited in May 2025, has caused severe losses for both countries. More than 100 deaths have been reported and more than half a million civilians have been displaced. The economic cost of the conflict has been amplified by the economic interdependence between the two countries. The interdependence has been driven by international trade, foreign direct investment, labour migration and tourism. 

In terms of trade, Thailand was Cambodia’s third most important source of imports and the eighth most important export destination in 2024 (Table 1). Thailand was a key supplier of essential goods to Cambodia such as oil, food and beverages, and vehicles. Thailand’s key imports from Cambodia included agricultural raw materials (for example, cassava), metallic wastes, wiring sets and electronic parts. Thailand is also a key investor in Cambodia.

Mutually Dependent

Table 1: Major Trading Partners of Cambodia, 2023-2024

Exports	% share of total exports	Imports	% share of total imports
1. US	38.1	1. China	45.8
2. Vietnam	13.3	2. Vietnam	14.7
3. China	6.5	3. Thailand	12.0
4. Japan	5.2	4. Indonesia	3.8
5. Canada	4.0	5. Singapore	3.2
6. United Kingdom	3.6	6. Taiwan	2.6
7. Spain	3.6	7. Japan	2.6
8. Germany	3.5	8. Republic of Korea	1.9
9. Thailand	3.4	9. Hong Kong	1.2
10. Singapore	1.0	10. Switzerland	0.02
Total	82.1	Total	87.8

The border conflict has disrupted the overland trade between the two countries (which, together with formal trade, constitutes total bilateral trade). Overland trade averaged around USD1.2 billion per quarter over the two-year period leading to the first quarter of 2025. This traffic has vanished with the border closures, creating economic hardship for people living in the border areas between the two countries. Overland trade between the two countries declined from USD1.9 billion in the second quarter of 2025 to USD0.9 billion in the fourth quarter of 2025 (Figure 1).

Petering Out

Figure 1: Total Trade between Thailand and Cambodia, 2023-Q1 to 2025-Q4

Some of the decline in trade flows between the two countries involves disruptions to supply chain linkages that span their borders. Numerous multinational companies operating in Thailand had established factories in special economic zones located along the Thai-Cambodian border. Prior to the conflict, companies with higher-end manufacturing activities in Thailand adopted a Thailand Plus One strategy, expanding labour-intensive processes into neighbouring countries such as Cambodia and Laos. The strategy sought to leverage the relatively stable environment and improved transport infrastructure in the border region. Companies such as Yazaki Corporation, Nidec Corporation, NHK Spring (Japan), Toyota Tsusho, Western Digital and Seagate had shipped parts and components across the border through overland transportation. Yazaki, which manufactures wire harnesses in the Neang Kok Koh Kong special economic zone near the border in Cambodia, have been shipping the products through the checkpoint in Trat province in Thailand’s eastern region. Smaller companies are likely to be hard hit by the border closures. Larger multinational companies should be able to partially switch their transportation mode from overland to sea and air freight. Some companies involved in outsourcing are already considering relocating back to Thailand.

Given the economic interdependence between Thailand and Cambodia, the current border conflict demonstrates that decoupling the two economies is very costly.

The border conflict has also affected people and labour movements. In 2024, more than two million Thais visited Cambodia. Thailand was the top source of tourist arrivals in Cambodia, accounting for 33 per cent of international visitors. Both economies are also intertwined by cross-border labour movements. The border conflict has disrupted labour flows between the two countries. The number of official Cambodian workers in Thailand has dropped by 20 per cent, from 493,570 workers in November 2024 to 396,179 workers in November 2025 (Table 2). This decline has mostly involved short-term workers. Cambodian workers who have remained in Thailand are mostly under long-term contracts.

Disrupted Labour Flows

Table 2: Number of Cambodian Workers in Thailand, 2024 and 2025

Channels	November 2024	November 2025 (% change from the same time of the previous year)
1. Short-term/seasonal workers1	32,453	6,072 (-98%)
2. Long-term contracts (2.1+2.2+2.3)2	461,117	390,107 (-15%)
3. Total (1+2)	493,570	396,179 (-19.7%)

Notes: The latest data available are for November 2025: ¹ Article 64 of the Royal Ordinance Concerning the Management of Foreign Workers’ Employment BE 2560 (ROC); ² This figure constitutes (a) memorandum of understanding (Article 59 of ROC), extended contracts (Cabinet Resolution 4 Feb 2020 and regularised migrants (Cabinet Resolution 24 Sep 2024).

Today, Cambodian workers still account for nearly 22 per cent of the official foreign workers in Thailand and around 1 per cent of the country’s labour force. The number of Cambodian workers in Thailand remains persistently high. This reflects the mutually beneficial nature of labour flows between the two countries. Cambodian workers in Thailand are concerned about the dearth of job opportunities and lower wage levels in their home country. Thailand is also finding it hard to find substitute workers from other countries. This will further tighten the Thai labour market in the future amid an ageing population.

Given the economic interdependence between Thailand and Cambodia, the current border conflict demonstrates that decoupling the two economies is very costly. Even if the ceasefire is sustained and the border is re-opened in the future, it will still take a long time to repair the economic relationship between the two countries. The rebuilding of trust between the two countries will be important; this, in turn, will depend on the political will of the leadership in both countries.

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