Country Report Cambodia March 2011

Economic performance: The crossborder clashes have a modest economic impact

While the crossborder fighting near the Preah Vihear temple has had serious diplomatic consequences for Cambodia and Thailand, the economic impact of the clashes appears to be less severe. Thailand's official exports to Cambodia were down by around Bt110m (US$3.6m) from previous levels each day during the four-day fighting period, according to Thailand's Ministry of Commerce. That country's exports to the western provinces of Cambodia were most affected, falling by 20-25% (around Bt30m-40m per day). Meanwhile, the ministry has estimated losses of Bt75m owing to an indefinite postponement of a trade fair, the Thailand Exhibition 2011. (The exhibition had been scheduled to be held in the Cambodian capital, Phnom Penh, on February 17th-20th.) The Thai ministry expected the clashes to have only had a short-term impact, estimating damage to bilateral trade at no more than 5% of existing volumes-provided that the situation does not intensify. According to the Thai deputy commerce minister, Alongkorn Ponlaboot, damage to bilateral trade could climb to 10% if the fighting is prolonged.

Solidarity between Thai and Cambodian speakers at the first 2011 Cambodia-Thai Business Summit, which was held on February 17th in Phnom Penh, was another positive sign. At the event, business representatives discussed measures to improve commercial relations, such as opening more international border-crossing points, improved logistics and the easing of vehicle restrictions at borders.

Thai trade and investment, especially in Cambodia's eastern provinces, have been important since the waning of communism in Cambodia. Many Cambodian farmers in those provinces sell their crops to Thai buyers who travel across the border, and Thai investors (who sometimes assume a Cambodian name and nationality, as in the case of a prominent Cambodian senator and tycoon, Ly Yong Phat, also known as Phat Suphapha) have been instrumental in setting up Cambodia's burgeoning sugar-cane industry. Thailand is an important export market for Cambodia: according to the Bank of Thailand (the central bank), Thailand's imports from Cambodia (a proxy for Cambodia's exports to that country) stood at US$214.7m in 2010, representing a rise of 176.4%. Meanwhile, Thailand's exports to Cambodia totalled US$2.3bn, representing a rise of 48.2%.

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
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