Home / Research & Analysis / Research Report
7 Sections · 48 Pages · October, 2025
Impacts of the Cambodia-Thailand Border Dispute on Cambodia’s Economy
A study compiled by researchers from the Cambodian Center for Regional Studies under an academic exchange with the Institute for Strategic Policy*
*The study was undertaken in an academic exchange between CCRS and ISP to deepen the understanding on economic fallout from the border closure with information from available open sources. It doesn’t represent any official Cambodian position.
Executive Summary
- The armed conflict from 24-28 July 2025 along the border between Cambodia and Thailand has greatly eroded societal trust between the two nations and severely impacted negatively the bilateral relations of the two states. The five-day military clashes, along with the period of increased tensions that preceded them and the ongoing issues related to securing a lasting peace, have had a profound impact on Cambodia and Thailand. There has been a detrimental effect on the well-being and livelihoods of the displaced population, on residents of the border zones, on members of the military and their families, and on Cambodians more generally due to the psychological and economic costs of the conflict. A fact-based assessment of the economic disruptions makes clear the degree of economic interdependency between the two countries, and the absolute gains potentially available through reconciliation, rebuilding people-to people ties, and a return to pre-conflict normalcy.
- Overt hostilities initiated on 28 May 2025 when there was an armed clash resulting in the loss of life of one Cambodian warrant officer. Prior to that event, Cambodia had close interdependent economic relations with Thailand, particularly in trade, investment, labor, and tourism. The as-yet-unresolved border dispute between Cambodia and Thailand has negatively impacted Cambodia’s economy, which is closely connected with Thailand through mutually beneficial processes of trade, investment, labor mobility, and tourism.
- The border dispute since late May 2025 has strategic implications for Cambodia as it presents formidable challenges to the country’s development strategies and economic policies. These challenges stem from the direct and indirect impacts of the economic shock and disruptions that the conflict has engendered. These disruptions include: A) a substantial decrease in trade due to border closures; B) a significant change in consumption patterns within Cambodia resulting from a boycott movement against Thai businesses, which puts at risk tens of thousands of jobs for Cambodians at risks and as well as investor confidence in the country; C) socio-economic costs of a massive influx of labor, fomenting untenable levels of unemployment, as a result of a mass exodus of Cambodian workers from Thailand; and, D) the cost of a sharp decline of Thai tourism to Cambodia.
- To address these immediate economic fallouts, Cambodia’s policy responses include enhancing economic diversification, boosting domestic production capacities, and fostering reintegration programs for returned migrant workers.
- The prospects for Cambodia-Thailand economic relations depend on how quickly both countries are able to peacefully manage and resolved this border dispute. If the border dispute is prolonged or a hot conflict returns, the long-term economic effects will be severe for both Cambodia and Thailand. Important benefits for both countries will result from establishing a resilient peace and re-engaging their economic ties, in order to procure the normalization of economic interdependence that has brought win-win outcomes for both.
- This report discusses the following: 1) the overall state of economic relations between Cambodia and Thailand prior to the initiation of hostilities in late May 2025; 2) the strategic implications of the border dispute on Cambodia’s economy; 3) the immediate impacts of the dispute on Cambodia’s economy (as well as potential spillover effects and further ramifications); 4) Cambodia’s policy response to these undesirable economic impacts; 5) the future prospects for Cambodia-Thailand economic relations; and, 6) some policy recommendations for the normalization of economic relations and mitigating the substantial economic costs on the basis of economic incentives and a recognition of absolute gains for both countries.
- To restore normalcy and build a more resilient economy, Cambodia should consider the following policy recommendations: A) restoring a pragmatic diplomatic engagement with Thailand to swiftly reopen the border and deescalate military threats on both sides; B) providing economic relief for border provinces of Cambodia; C) establishing a national worker reintegration fund to support returned migrant workers; D) accelerating diversification Efforts; E) promoting domestic tourism.
Research Overview
- Executive Summary
- 1. Introduction
- 2. Economic Relations Prior to Late May 2025
- 3. Strategic Implications of the Cambodia-Thailand Border Dispute on Cambodia’s Economy
- 4. Immediate Economic Impacts of the Cambodia-Thailand Border Dispute on Cambodia
- 5. Cambodia’s Policy Response
- 6. Future Prospects for Cambodia-Thailand Economic Relations
- 7. Policy Recommendations for Economic Normalization between Cambodia and Thailand
Research Overview
- Executive Summary
- 1. Introduction
- 2. Economic Relations Prior to Late May 2025
- 3. Strategic Implications of the Cambodia-Thailand Border Dispute on Cambodia’s Economy
- 4. Immediate Economic Impacts of the Cambodia-Thailand Border Dispute on Cambodia
- 5. Cambodia’s Policy Response
- 6. Future Prospects for Cambodia-Thailand Economic Relations
- 7. Policy Recommendations for Economic Normalization between Cambodia and Thailand
Facebook
X
LinkedIn
Further Reading
- Analysis
As global supply chains reconfigure around technological sovereignty and resilience, Thailand stands at a critical juncture.
