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6 Nov 2009

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Thailand-Cambodian Border Trade: Impact of Conflict (Business Brief No.2682)

The present tensions between Thailand and Cambodia haven’t affected trade relations because no border trade closures have been announced yet. It is expected that if the conflicts ease, border trade will go unscathed. However, if the tensions between the two countries intensify and result in border closures, mutual trade valued at around THB70 billion/year (where Thailand has always posted a trade surplus with Cambodia), will be hampered by slowing exports to Cambodia. The severity of this would depend on the duration of such closures.
However, if the tensions persist and result in the Thai and Cambodian authorities imposing other more serious measures or extending border closures indefinitely, it could seriously impact Thailand’s exports to Cambodia and become a negative factor toward Thai trade expansion in the future. At present, Cambodia relies considerably on imported goods from Thailand due to Cambodia’s common border and Cambodia’s insufficient domestic production to meet demand. Therefore, Cambodia has to import goods, particularly consumer products, construction materials and industrial needs such as oil and cement, fromThailand. However, Vietnam and China’s increasing trade role may supplant Thailand’s market share in Cambodia, particularly if Vietnam, which also has a common border with Cambodia, pursues such trade. At present, imports from Vietnam rank second overall in the Cambodian marketplace, after Thailand.
As for China, despite not having a common border with Cambodia, they rank third in Cambodia. Chinese goods also have the chance to increase their market share in Cambodia due to China’s economic potential and increasing role in the development of logistics and transportation routes in Indochina and ASEAN, enabling China’s exports to reach Cambodia more easily. We may say that Thailand’s vital role in exports to Cambodia may be challenged by trade rivals such as Vietnam and China that may seize Thailand’s market share there in the future if the tensions between Thailand and Cambodia result in a cessation of border trade.

However, as Cambodia relies on many imported goods from Thailand, if a border closure occurs, consumers and importers in Cambodia may turn to imports from other countries, instead, despite prices that may be higher than Thai goods due to higher transportation costs over longer distances to Cambodian markets. This may result in the Cambodian people having to bear higher costs of living, while their business sector may be hampered by higher costs of raw materials and intermediate goods.

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