War Has No Winner: Economic Impact of Thai-Cambodia Border Conflict

“When the rich fight the rich, it is the poor who die”
Jean-Paul Sartre

The cost of the border conflict has been high for both Thailand and Cambodia. Furthermore, the consequences that come after the shooting stops can be even higher as they affect trust and cooperation between the neighbours.

Thailand and Cambodia have a history of enmity over centuries and have experienced periodic hostilities along their shared border of more than 800 kilometres (500 miles). Their competing territorial claims stem largely from a 1907 map drawn when Cambodia was under French colonial rule, which Thailand has argued is inaccurate, unfair and below standard (the scale of 1: 200,000 vs 1: 50,000). Even so, trade and relations seemed to be good before the clash began.

The Thai Finance Minister, Pichai Chunhavajira, said on 29 July, the escalation in the Thai-Cambodian border conflict has posed significant risks to both nations' economies. The conflict has disrupted bilateral trade between the two countries with a goal of USD 15 billion for 2025. In the first five months of this year, Cambodia imported USD 1.4 billion in Thai goods and exported USD 395 million to Thailand.

Meanwhile, Thailand has estimated the initial costs of evacuation and damaged property at more than 10 billion baht (USD 333 million) after the five-day border conflict with Cambodia, and it is expect the eventual economic impact to be even higher.

Thailand and Cambodia have had a long-running dispute over territory on their shared border. Tensions began to escalate in May when a Cambodian soldier was shot and killed by Thai troops in one of the contested border areas. The growing dispute was marked by border crossing restrictions, cross-border boycotts and bans of goods and services and then following a land mine explosion on 23 July in one of the disputed areas that injured five Thai soldiers, with one losing a leg, fighting erupted on Thursday, 24 July.

This was the second such incident in a week and the proximate cause of the armed conflict. Both countries then recalled their ambassadors, downgrading diplomatic relations, and Thailand closed its border crossings with Cambodia.

According to reports, clashes erupted on 24 July near Ta Muen Thom and Preah Vihear temples, involving artillery, rocket fire, drones, F‑16 airstrikes and cluster munitions. Civilians and cultural heritage sites were hit as the fighting rapidly escalated. It was some of the worst modern warfare between the two countries, which have clashed before over this longstanding territorial dispute. Over 40 deaths were reported, including soldiers and civilians. There were also many injured and extensive damage to infrastructure, like hospitals and pagodas. Over 300,000 people were displaced by the end of fighting.

In addition to the downgrading of diplomatic ties, Thailand’s government faced domestic political upheaval with the prime minister suspended because of a phone call she made to Cambodian Senate President Hun Sen, which some Thai senators said was unethical.

Hence, the Thailand-Cambodia border conflict has emerged as another of Southeast Asia's consequential geopolitical crises in the last decade, reshaping regional dynamics and triggering a cascade of economic and strategic implications.

Finally, a ceasefire began on 28 July, brokered by ASEAN (led by Malaysia) and influenced by US pressure, notably trade threats by President Trump, and China’s warning and call for a ceasefire. Subsequent talks have taken place in Kuala Lumpur under ASEAN auspices, focusing on reinforcing the ceasefire and preventing future escalation.

Ken Lohatepanont, a political analyst and University of Michigan doctoral candidate, said, Thailand has been racing to negotiate with the US for a favourable tariff rate to help its underperforming, export-oriented economy. Following the ceasefire, the US announced that Thailand and Cambodia would face 19% tiraffs, nearly 50% lower that the previous 36% announced.

The recent ceasefire negotiations, however, did not deal with the underlying disputes and made only a sketchy mention of arranging truce monitors. Despite a formal ceasefire, both nations continue to accuse each other of ceasefire violations, propaganda and mistreatment of prisoners—including allegations of torture and refusal to repatriate captured soldiers.

Paul Chambers, an American scholar on Thailand’s military who recently fled the country after legal threats from the army and brief imprisonment by the Thai police, said the ceasefire represents a positive sign. However, he went on to say that it is not sustainable unless credible, third-party representatives, such as those from ASEAN, are allowed to monitor the situation on the ground.

If the ceasefire does hold, each government will be able to claim success and possibly entrench their hold on power, undergirded by nationalistic support that is drummed up by each state.

According to economists, the economic impact of a three-month conflict could lead to a combined economic loss of 181.7 billion baht (approximately USD 5.3 billion) for Thailand and Cambodia. This is based on an estimated loss of 60.6 billion baht for a one-month conflict. Thailand has estimated initial losses of at least USD 300 million from the five-day conflict.

Based on reports from mid-2025, a prolonged border conflict between Thailand and Cambodia could have a significant economic impact on both countries. A month's disruption could result in a loss of 40 billion baht from border crossing exports at 18 locations. If the crisis extends beyond six months, Thai export losses could reach hundreds of billions baht, with a risk of permanently losing export infrastructure as Cambodia seeks alternative suppliers.

In addition, the conflict has led to the displacement of over 250,000 Cambodian workers in Thailand. The economy has been particularly hard-hit, with a disruption to key sectors like agriculture, fisheries and construction. The conflict has also caused a significant drop in tourism for both nations. Cambodia is believed to have faced a larger financial hit due to its smaller and less diversified economy. The local population will also suffer as most consumer products are imported from Thailand.

Since the Thai-Cambodia border conflict represents a direct test to ASEAN’s foundational claim that no two members would engage in war, the conflict has exposed the bloc’s limited operational capacity to mediate serious intra-member conflict. Indonesian lawmakers warned that escalation between members could destabilise ASEAN cohesion and expose the region to proxy dynamics involving global powers, some analysts have said.

On 27 July, ASEAN foreign ministers issued a statement urging both Thailand and Cambodia to exercise restraint, cease hostilities and resolve differences peacefully under the ASEAN Charter and the Treaty of Amity and Cooperation (TAC). Malaysia, as the ASEAN chair, led mediation efforts—hosting ceasefire talks in Putrajaya and convening further negotiations in Kuala Lumpur.

Analysts contend that ASEAN’s response was reactive and limited. The consensus-driven model, preference for quiet diplomacy and non-interference norm delayed effective intervention. The bloc faced criticism for lacking binding enforcement tools, robust monitoring mechanisms or an expedited dispute-resolution process—even as member states clashed in open warfare, the most serious in over a decade.

However, Cambodia proceeded to bring elements of the dispute to the UN Security Council and International Court of Justice, highlighting bilateral distrust while Thailand prefers bilateral talks through the Joint Boundary Commission (JBC).

One political commentator said, “Enduring distrust and political fragmentation suggest a high risk of recurring localised clashes, especially in resource-rich border zones prone to smuggling, logging, casinos, cybercrimes, migration flows and human trafficking.”

Analysts also warn of rising nationalist rhetoric, misinformation, propaganda, fake news threats and militarisation as persistent drivers of instability in both countries. Furthermore, increased defence budget and cost of war could now be taken from the budget of social programs, like education, healthcare and housing for the poor.

In conclusion, both countries should find a common ground that would lead to a win-win solution instead of escalating the rhetoric or military action in the battlefield. As Bertrand Russell has reminded us, “War does not determine who is right—only who is left.

Business / Business

War Has No Winner: Economic Impact of Thai-Cambodia Border Conflict

Kamol Kamoltrakul 46 Posts

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