Thai businesses fear closure of border

Published: 21/11/2009

(Posted by CAAI News Media)

As the Thai-Cambodian media skirmish continues, Thai executives are starting to fear their operations will suffer.

Gamblers are staying away from casinos in Koh Kong and Poipet, while tourist numbers are on the slide. Kasikorn Research Center said the escalating tensions could affect businesses and populations on both sides of the border.

The conflict between the Thai and Cambodian governments recently reached a new and alarming level when both countries withdrew their ambassadors after Cambodia named fugitive former prime minister Thaksin Shinawatra as an economic adviser and refused to extradite him when he visited the country.

But the Thai-Cambodian border remains open so the border trade, which accounts for as much as 80% of bilateral trade, continues as usual.

If the conflict is quickly resolved without either side resorting to force, trade will not be disrupted, said K-Research.

Even a temporary border closure, similar to that caused by the earlier Preah Vihear temple dispute, would only have a limited impact, the researchers said. But a prolonged closure would inevitably damage trade, causing Thai exporters to lose their share in Cambodia's market.

Thai exports to Cambodia last year were worth 67 billion baht, while imports from Cambodia were only 3 billion baht.

Thailand's trade surplus reflects Cambodia's inability to supply its market's demand, while Cambodian consumers are accustomed to imported Thai products such as sugar, beverages, cosmetics, soaps and related products. The Cambodian business sector also relies on imported processed oil and cement.

Thailand is currently the largest exporter to Cambodia, supplying 23% of its imports, followed by Vietnam with 17% and China with 15%.

Like Thailand, Vietnam benefits from close proximity with Cambodia, with significant border trade. Vietnam's exports to Cambodia have soared from US$178 million in 2002 to $1.43 billion last year. The country is now competing directly with Thailand in oil, sugar and cement.

Chinese goods, currently in third place, also have good opportunities for growth due to the strength of the Chinese economy and the development of the logistics system linking China and Asean.

But Cambodia would also face losses from this scenario. Materials and intermediate goods from other countries for its production sector would likely have higher prices due to the logistics costs. Similarly, Cambodian consumers would likely have higher living costs.