Thai investors weigh shifting production from Cambodia as garment sector risk rises

The second round of clashes along the Thai-Cambodian border began on December 8, 2025, following the first round of fighting from July 24-28, 2025. The renewed hostilities have led to the closure of 18 border checkpoints along an 800-kilometre frontier shared with seven Thai provinces: Trat, Chanthaburi, Sa Kaeo, Buri Ram, Surin, Si Sa Ket and Ubon Ratchathani.

The situation has forced Thai companies investing in Cambodia to adjust their business plans. Thai staff have been brought back home, while some firms have removed projected revenue from Cambodia from their business plans altogether.

Voratat Tantimongkolsuk, president of the Thailand-Cambodia Business Council, said the intensifying tensions along the Cambodian border in recent days made it impossible to predict when the situation would ease, adding that it must be monitored closely.

On the economic side, however, the impact remains “unchanged”, he noted, because the border checkpoints are now 100% closed, without partial openings as seen previously. As a result, the effect on cross-border trade and goods transport is broadly similar to the earlier round.

“If the tension ends in two or three days, the impact will look one way. But if it drags on for another one or two weeks, the damage will be different again, so it is very hard to assess,” Voratat said.

For Thai businesses operating in Cambodia, there has so far been no formal meeting or discussion within the Thailand–Cambodia Business Council. All sides are in monitoring mode, watching developments in both countries very closely. There have been no additional confirmed reports yet of direct damage to Thai businesses on the ground.

Cambodian garment factories cut output

Thavorn Kanokvaleewong, president of the Thai Garment Manufacturers Association (TGMA), said there are currently around 5-10 large Thai companies in the garment industry with production bases in Cambodia. Most of them have already reduced capacity since the closure of trade crossings between Thailand and Cambodia.

The latest clashes have deepened business concerns, he added, making it harder to continue operating in Cambodia given the interstate conflict and the current situation, which is very different from when Thai firms first invested there.

“Most Thai garment manufacturers in Cambodia operate OEM factories as export production bases. The outlook is therefore negative and likely to worsen, so we will have to wait and see how the situation unfolds,” Thavorn said.

 

Since the first round of clashes, there has been no sign that the private sector will invest or expand further in the short to medium term, due to uncertainty over several factors: rising production costs, logistics problems and the erosion of Cambodia’s tax advantages.

“Many factories in Cambodia, especially around Phnom Penh, were originally set up as second or third production bases for plants in Thailand. But they still rely on key customers and raw materials from Bangkok.

“When the border crossings are shut, upstream fabric shipments from Thailand are delayed: what used to take three days by road now has to go by sea, taking about two weeks. This disrupts the supply chain, and many operators have started ordering fabric from Vietnam instead, accounting for around half the value of what they previously bought from Thai suppliers,” Thavorn said.

Looking for new production bases to replace Cambodia

Production costs in Cambodia have risen two to three times, driven by both transport and labour expenses. The Cambodian government has raised the minimum daily wage from 250 baht to 300 baht in an effort to lure workers back to the country, while Thailand’s minimum wage is around 400 baht per day. This means Cambodia’s labour-cost advantage has narrowed to only about 20%. Even so, many Cambodian workers still want to return to work in Thailand because incomes remain higher.

Thavorn said that Cambodia’s key advantage used to be preferential tariff treatment under the Generalised System of Preferences (GSP) granted by the United States and the European Union, but those benefits have now disappeared. The EU withdrew its preferences in 2020, while the US has adjusted Cambodia’s status to be in line with other countries. As a result, Cambodia’s export costs are now no different from those of Thailand, Vietnam or Indonesia.

“If the border crossings do not fully reopen soon, Cambodia’s garment industry will be hit even harder. Higher costs will cause customers to cut their orders, and many Thai factories may gradually scale down production in Cambodia and shift back to manufacturing in Thailand instead,” Thavorn said.

He added that over the next two to three years, business expansion in Cambodia is likely to keep declining if the border situation and cost structure do not improve. There is therefore a high likelihood that operators will steadily withdraw their production bases, either back to Thailand or to other countries.

Sales in the Cambodian market decline

The Thai-Cambodian conflict has now dragged on for more than five months. The latest clashes along several sections of the border since last weekend have further underlined the persistent tensions between the two countries.

A survey of Thai businesses with operations or factories in Cambodia found that all have been affected. The impact extends to companies that do not have factories there but export goods to the Cambodian market or rely on cross-border trade; they are all facing a sharp drop in sales.

Previously, several Thai brands had already disclosed the impact from the Cambodian market. Malee Group Public Company Limited, which sells dairy products, fruit juices and coconut water, reported that its third-quarter sales fell by 2.3%, with the main factor being a slowdown in dairy product sales in Cambodia.

Karmarts Public Company Limited has seen its Cambodian market sales fall by 7-8 million baht per month, particularly over the past three months, when the impact has been continuous and the situation has entered its most severe phase.

Adjusting packaging to escape the “witch-hunt”

A business-sector source said the conflict between Thailand and Cambodia has significantly affected the sales of consumer goods for many companies, with some estimating initial losses in the billions of baht, even for products that previously held up to 80% market share.

The source said that, in response, many companies have begun to adapt in several ways. These include adding Khmer language to product labels and putting the Cambodian flag on packaging so that goods appear to be local products. Marketing under clearly Thai-branded identities has largely been put on hold.

Given that these businesses operate in many countries and have been active in Cambodia for decades, Thai operators believe they can stand on their own without relying on the Cambodian market. For now, Cambodia has effectively been removed from their business equations so that the loss of Cambodian revenue does not derail overall business plans.

“At this moment, Thailand’s security and sovereignty are of the highest importance,” the source said.

Thai brands active in the Cambodian market continue to face a strong backlash, with a “witch-hunt” atmosphere emerging against shops that still sell Thai products, forcing many companies to adjust.

This picture is in line with comments previously made by Sathien Sathientham, group chief executive of Carabao Group, who said the Thai-Cambodian conflict had wiped out hundreds of millions of baht in sales of the company’s energy drinks in Cambodia.

The impact on Thai brands has continued, he noted, as influencers produce content visiting shops and publicly criticising those that stock Thai goods as unpatriotic, questioning why they still sell Thai products.

Even so, business operators say they simply hope the current conflict will find a way out so that the situation can improve and trade can eventually return to normal.