Is Thailand shooting itself in the foot with Cambodia border closure?

Thailand’s pesky border closure, intended as retaliation against Cambodia for no apparent reason, will inflict a huge cost on the Thai economy, many analysts have warned.

After suffering political embarrassment following the leaking of her phone conversation with Cambodia’s former prime minister Hun Sen, Prime Minister Paetongtarn Shinawatra authorized the commanders of two army regions and the navy to seal the border from June 23.

Justification for the measure

The military justified the move by citing repeated violations of Thai sovereignty by Cambodian military forces, including patrols, the construction of fortified positions and alterations to the terrain.

Cambodian troops were also accused of bringing civilians into the disputed area to engage in symbolic actions that were provocative.

“These actions occurred within the area of responsibility of the 2nd Army Region and have adversely affected the safety of residents along the border and caused rising tensions,” according to a joint statement from the military.

“This situation may also impact people crossing the border in the 1st Army Region. Moreover, there have been incidents of transnational crimes, including call center scams and hybrid scams, which have broadly affected the lives and property of people both in Thailand and across the region,” the statement said.

The First Army Region is responsible for security in the eastern border zone, while the Second Army Region oversees the northeastern region. The Navy oversees the two coastal provinces of Chanthaburi and Trat.

While the military has cited sovereignty violations and crime prevention as justification, the measures appear to reflect a shift in focus from the territorial dispute at Chong Bok in the Nam Yuen district of Ubon Ratchathani province to tackling scam operations along the border.

The Thai prime minister said the implementation of such measures was a part of efforts to crack down on transnational crime, which has been a long-standing issue.

The government is well aware that restricting cross-border movement affects residents and businesses in the area, she said.

“For private companies that are outside the authority of the state but engage in behavior or operations that impact national security—especially in cases related to transnational crime—appropriate actions will be considered to ensure comprehensive protection of the country’s security,” Paetongtarn said.

Economic impact on both countries

Government spokesperson Jirayu Huangsab revealed that the border closure caused an estimated daily trade loss of around 330 million baht at all checkpoints on the 798-kilometer-long border.

Aat Pisanwanich, an economist at the University of the Thai Chamber of Commerce, said the border closure would inflict economic losses on both sides.

As all border checkpoints have been closed, Thailand would stand to lose 700–800 million baht in revenue per day, impacting small and medium-sized enterprises as well as local vendors in border provinces, he said.

The fallout would be an immediate 10-20 per cent rise in product prices for Cambodians, he added.

The economic implications for Cambodia from these measures were likely to be far less serious than what the Thai government expected, he said, while throwing light on the nature of trade between the two countries.

Thailand’s top exports to Cambodia were gold, gemstones and jewelry, which accounted for 33% of total exports, valued at more than 106 billion baht. These are non-essential goods, whose imports Cambodia can suspend without suffering any serious economic disruption, Aat explained.

The second-largest Thai export is refined petroleum. Cambodia’s market currently relies on imports from Thailand for up to 50% of its needs, supplemented with imports from Vietnam and Singapore.

As Prime Minister Hun Manet has ordered a suspension of fuel imports from Thailand, Cambodia may shift to sourcing from Singapore and Vietnam instead, he said.

Processing the orders for higher volumes, however, would take at least one month, leading to higher fuel costs for Cambodians, Aat said.

Cambodia’s farm sector is expected to bear the brunt of the fallout, as Thailand has banned the import of cassava from the neighboring country.

Cambodia currently produces around 20 million tons of cassava annually, and Thailand is one of its main markets. In 2024, more than 40 per cent of Cambodia’s cassava exports went to Thailand, lower than the 51 per cent in 2023.

If Cambodia can no longer export to Thailand, it would have to find alternative markets to absorb the surplus, such as Vietnam, another key market, Aat said.

“Vietnam likely cannot absorb the entire volume, as this would drive down prices of its domestic production, he said. “This measure will significantly impact Cambodian farmers and exert pressure not only on the Cambodian government but also on the Vietnamese government,” he added.

The ban on cassava imports during this time would impact the Thai market as the domestic harvest season ended in May, raising the risk of a shortage of raw materials for animal feed, according to Aat.

The director-general of the Department of Foreign Trade, Arada Fuangtong, estimates a loss of over 60 billion baht in cross-border exports for Thailand during the second half of the year if the border closure is prolonged until the end of this year.

Ordinary citizens face a crisis

The sudden border closure order from the Thai government on June 23 has had a direct impact on people living and working along the border, particularly Thai people who worked in Cambodia, many of whom are now seeking illegal ways to cross back into Thailand.

On June 26, about 30 vendors from Rong Kluea Market and residents of Aranyaprathet district in Sa Kaeo province gathered along the road leading to the Ban Khlong Luek-Poi Pet permanent border checkpoint, holding signs about the hardships caused by the border closure.

Several vendors told local media that their income from trading had dried up to the point of having no daily income at all after the strict cross-border travel restrictions were imposed, making it impossible for them to support their families.

The president of the Chanthaburi Chamber of Commerce, Ukrit Wongthongsalee, said business and cross-border activities had to cease completely after the authorities enforced the border closure.

Only individuals with essential needs—such as students or those seeking medical treatment—were allowed to pass through the checkpoints, he said.

“What’s unfortunate is the plight of border entrepreneurs—at various points, especially in the eastern region, including Sa Kaeo, Chanthaburi, and Trat provinces. These are all key trade zones,” Ukrit said.

Border restriction measures are also affecting Cambodian workers who crossed the border to work in Thailand. On being requested by Cambodian leaders, some of them have left their jobs due to fears for their safety, resulting in a labor shortage in Thailand.

Nearly 500,000 Cambodians—around 400,000 documented—work in Thailand's construction, agriculture and retail industries.

Paetongtarn has assured that the government has no intention to expel workers.

Border provinces like Chanthaburi and Trat have relied on the workforce from Cambodia for fruit picking and packaging, and would need to find workers from other sources, Ukrit said.