Economy & Diplomacy: Persistent conflict between Cambodia and Thailand and its implications

The long-standing border dispute between Cambodia and Thailand is escalating into a worrying standoff with significant diplomatic and economic consequences.

Cambodian troops stationed at the border

It should be recalled that this conflict, which concerns disputed areas along their 800-kilometer common border, particularly near the Emerald Triangle where Cambodia, Thailand, and Laos meet, erupted spectacularly on May 28, 2025, when a skirmish resulted in the death of a Cambodian soldier. Since then, both countries have reinforced their military deployments, tightened border controls, and engaged in a series of tense diplomatic exchanges.

No result

Efforts to resolve the conflict through diplomatic channels have made some progress but remain unsuccessful. A meeting of the Joint Border Commission (JBC) held on June 14 and 15 in Phnom Penh, attended by delegations from both countries, was described as cordial and constructive by the Thai Ministry of Foreign Affairs, but no definitive solution was found.

Cambodia has formally requested the intervention of the International Court of Justice (ICJ) to rule on four disputed border areas, including former temple sites and the tripartite border area, in order to find a peaceful and legal solution. Thailand, however, rejects the ICJ's jurisdiction and insists that bilateral negotiations be initiated.

The diplomatic impasse has fueled a cycle of retaliatory economic measures that risk exacerbating the crisis. Thailand has imposed strict restrictions at the border, blocking tourists, particularly those wishing to visit Cambodian casinos, and tightening controls on cross-border travel and trade.

In response, Cambodia has reduced electricity and fuel imports from Thailand, banned Thai agricultural products, and restricted access to certain Thai internet services. These measures jeopardize vital economic ties: Cambodia imports about 30% of its fuel and a significant share of its electricity from Thailand, while cross-border trade between the two countries reached more than 67 billion baht in the first four months of 2025, covering commodities such as beverages, fuels, vegetables, and construction materials.

The escalating tensions between Cambodia and Thailand have significant economic consequences for both countries, affecting trade, employment, tourism, and infrastructure projects.

Disruption of cross-border trade

Both countries have implemented measures that hinder the movement of goods.

•  Cambodia has banned imports of oil, fruit, vegetables, and gasoline from Thailand, while Thailand has reportedly banned Cambodian motorcycles from entering its territory. Thailand is Cambodia's fourth-largest trading partner, highlighting the potential for significant economic repercussions.

• Impact on work and employment Thailand is heavily dependent on Cambodian labor, with around 500,000 Cambodian migrant workers employed in Thailand. The closure of borders and reduced opening hours at border crossings are disrupting daily travel between the two countries, affecting workers and businesses that depend on it. The Thai Ministry of Labor has reaffirmed the government's commitment to protecting these workers, recognizing their essential role in the Thai economy.

• Decline in tourism: Border closures and heightened tensions have led to a significant decline in tourism, particularly for businesses in border towns that rely on cross-border visitors. Thailand is an important source of tourism for Cambodia, and border restrictions could wipe out the gains made in this sector after the pandemic. Thai businesses, such as taxi services near the border, have reported a significant drop in revenue due to the decline in tourist traffic.

• Infrastructure projects at a standstill: Chinese-backed infrastructure projects, such as the high-speed rail in Cambodia and the Eastern Economic Corridor (EEC) in Thailand, could be delayed as territorial disputes erode investor confidence.

• Supply chain disruptions and economic uncertainty: Prolonged tensions could lead to widespread supply chain disruptions and create economic uncertainty for traders and investors. This could particularly affect Thai industries that depend on Cambodian raw materials.

• Risk to regional economic integration The conflict threatens to undermine economic ties between countries in mainland Southeast Asia and could divert ASEAN's attention from its efforts to promote economic unity.

The economic risks extend beyond immediate trade disruptions. Border markets and daily cross-border workers face uncertainty as checkpoints operate on reduced schedules and with heightened controls, increasing costs and complicating logistics.

Businesses on both sides are adapting cautiously, but prolonged tensions could erode confidence and disrupt ambitious regional trade initiatives, such as the road linking Thailand to Cambodia and then Vietnam and East Asia, a key corridor for accelerating exports. Tourism, a crucial sector in the border provinces, is also vulnerable to the fallout from escalating hostilities.

Politically, the border conflict threatens to destabilize a region that has enjoyed relative peace and growing cooperation in recent years.

 Cambodia and Thailand had previously expressed their mutual commitment to coexistence and development along their shared border, but the recent violence and diplomatic impasse risk undoing this progress.

For Thailand, already grappling with internal political instability, the conflict adds an extra layer of complexity with potential repercussions for national governance and regional security.

The border conflict between Cambodia and Thailand remains a sensitive and unresolved issue with considerable diplomatic and economic stakes. As dialogue continues, the way forward requires patience and respect for international legal frameworks to avoid further escalation.

The stability and prosperity of the region also depend on the ability of both countries to find common ground before tensions cause lasting damage to their populations and economies.