Cambodia - a relative winner amidst Thai clashes & US tariffs

Below we reproduce the third of our write ups from recent due diligence trip to Phnom Penh (PP). This issue concerns the politics facing the country, including Cambodia's border conflict with Thailand, as well as the threat of US tariffs at large.

We spent some good time researching these aspects and are happy to report that the bill of health is significantly better than we had feared, and what you may have expected, as well...

Border clash and trade - Cambodia on the upper hand

Whilst a lot of ink has been spilt on the negative impact of the border clashes, such as:

Article 2: ...conflict is projected to significantly impact Cambodia’s GDP and Thailand’s economy in the short term

Article 3: trade dropped sharply in August 2025, with imports down 29.1% ...and exports down 36.2% ...though Cambodia’s overall trade grew 15.5% to $42.15 billion, driven by markets like the US and Vietnam

In fact, the conclusion is already given in the headline of article 3 above - the important marginal development is Cambodia's enlarging pie with the rest of the world, rather than how it is shrinking with an ageing neighbour...

Cambodia net trade as % of GDP

What is more, Thailand has a massive trade surplus with Cambodia, worth 6% of Cambodia's GDP (red line above), meaning the need to reconcile is much stronger for Thailand than for Cambodia; however, a meaningful amount of this trade may be input components for Cambodia's further export processing.

Growth elsewhere may offset much of the loss?

In fact, looking at some sectors of the economy, you can detect significant increase in activities with other partners (article 4) , and especially so with China (article 5):

Article 4: The Royal Group Phnom Penh Special Economic Zone (PPSEZ) ...attracting new investments from China and Japan and employing over 55,000 workers.

Article 5: ...China bilateral trade reached a record $14.2 billion in the first nine months of 2025, up 27% from the previous year

The China element highlights the geopolitical trend we have been citing as a strong tailwind for Cambodia's industrialisation - the re-shoring of PRC manufacturing capacity to SEA!

As more migrant labourers return home, the momentum for capacity growth domestically also receive a major boost, where new factories will no longer have to compete with other nations for home grown workers working abroad:

Article 1: Border clashes forced 910,000 Cambodian migrant workers to return from Thailand

The flipside of this development is a loss of foreign remittances back home, which hopefully will be short term, and as these migrant workers are absorbed into new industrial zones, a lot of the lost wealth pre-remittance will now be kept in the borders of Cambodia:

Inflow remittances (%GDP)

Tariff - best of the lot!

The super proactivity in trade negotiations, even to the point of nominating President Trump for the Nobel Peace prize, suggests how hands-on the Cambodia administration is, compared to sleepier neighbours, amply illustrated by its lowest new US tariffs compared to other Asian competitors:

As a result, the latest forecast upgraded post-border clashes still sees Cambodia GPD to grow 5% before bouncing back to the 6% handle:

latest GDP forecast (Aug 2025, see here)

Senior ministers: young and highly educated

Most people may associate Cambodia with patriarchal sedantry, but a look beneath the hood reveals that the country is ruled by highly educated, young technocrats - below is the full list of cabinet ministers with their age and education:

Noteworthy is how the average age being only 55 years old, with 60% of the ministers younger than 60. Meanwhile 57% of the ministers have university degrees, from Harvard to NUS, from MIT to Wharton! The PM, Hun Manet, is even a West Point graduate...

Shouldn't these credentials give investors far more confidence investing in Cambodia than Thailand or Vietnam or Malaysia - the current top go-to destinations of investor property buying money?

======================Article 1===================

Thailand Turns to Sri Lanka to Plug Labour Gap After Cambodian Exodus

Yatt Malai                                    Published on: Thu, 21 Aug 2025

The recent border clash forced about 910,000 Cambodian migrant workers to return home, leaving Thailand facing a labour shortage that it is filling by hiring from countries including Sri Lanka, while Cambodia pledges to reintegrate returnees into its own economy despite concerns about limited job opportunities

[...]

https://kiripost.com/stories/thailand-turns-to-sri-lanka-to-plug-labour-gap-after-cambodian-exodus

======================Article 2===================

Mekong Strategic Capital Warns Thai Border Conflict Risks Significant Short-Term Impact to Cambodia’s GDP, but Long-Term Outlook Strong

Aug 14

Cambodia’s Growth Outlook Adjusted Downward Amid Border Conflict

Mekong Strategic Capital’s latest forecast anticipates Cambodia’s GDP growth slowing to around 3% in 2025, down from an earlier expectation of around 5%. This revision reflects the multifaceted economic fallout from the conflict, which escalated rapidly to become the region’s most significant economic risk.

[...]

https://cambodiainvestmentreview.com/2025/08/14/mekong-strategic-capital-warns-thai-border-conflict-risks-significant-short-term-impact-to-cambodias-gdp-but-long-term-outlook-strong/

======================Article 3===================

Cambodia–Thailand Trade Weakens Sharply Amid Border Tensions

Gerik                                                                                       Sep 14

Decline In Cambodia’s Imports From Thailand Signals Strained Trade Ties

According to the General Department of Customs and Excise (GDCE) of Cambodia, the total value of Cambodian imports from Thailand in August 2025 fell sharply to approximately $213 million, representing a year-on-year contraction of 29.1% from the $301 million recorded in August 2024. Cambodian exports to Thailand also dropped significantly by 36.2% to only $46 million in the same month, underscoring the mutual impact of deteriorating trade conditions between the two neighboring countries.

[...]

https://www.fastbull.com/news-detail/cambodiathailand-trade-weakens-sharply-amid-border-tensions-4343675_0

======================Article 4===================

Exports to Exceed $2B in 2025, No Significant Impact from US, Thailand, Says Royal Group SEZ

Oct 13                                                      Sangeetha Amarthalingam

By the end of 2025, the export value of goods from companies operating within the public-listed Royal Group Phnom Penh Special Economic Zone (PPSEZ) is likely to be over $2 billion, with no significant drop registered so far despite trade issues with the US and Thailand.

[...]

https://kiripost.com/stories/exports-exceed-2b-2025-no-significant-impact-from-us-thailand​

​======================Article 5===================

Cambodia-China trade hits record $14 billion, up 27%

Oct 14 Sum Manet / Khmer Times

Bilateral trade between Cambodia and China exceeded $14.2 billion in the first nine months of 2025, marking a robust 27% increase compared to the same period last year, according to the latest figures from the General Department of Customs and Excise (GDCE).

[...]

https://www.khmertimeskh.com/501772308/cambodia-china-trade-hits-record-14-billion-up-27/

Cambodia investing – the next Vietnam? 20230215

After boom in property investing in Thailand, Malaysia, and more recently Vietnam, Cambodia seems also to get attention of late. As fundamentally value investors committing ahead of the crowds, we took a look at the economic fundamentals of the new destination – Cambodia has seen massive investment inflow and economic growth in the past few years, and we reckon could be a next Vietnam if the government play their moves right…

FAI – 15 years of accelerating growth to peak?

We start by looking at the fixed asset investment as a percentage of GDP – if Cambodia follows only its neighbours Vietnam (green line, Chart 1: peak FAI as % of GDP c. 35%) or Thailand (purple line: peak at 42%) then its current 26% level (magenta line) has a long way to go yet – perhaps all the new airports (9 on the drawing boards for a 17m population country!), new national highways, and high speed rails will form part of that wealth growth in the next decades:

Chart 1: Cambodia’s FAI growth has c.15 years to run before peaking (e.g. Vietnam peaked in 2010, Thailand in 1996)

Urbanisation also early days yet – huge upside almost a certainty

We were taken back by the vast amount of construction that is taking place in Cambodia in a recent research trip there – it reminds one of the buzz of property construction activities saw in China during the early 2000s. In fact the Chinese are probably THE main thrust of the current breakneck growth in both new build and regentrification construction in Cambodia.

So how does this rush to urbanisation relate to the creation of wealth for the people? We compare the past experience of fellow SEA countries to where Cambodia is now to give some context to how fast the country might grow in future years:

Chart 2: Real GDP to surge just following the footsteps of other East Asia countries

The chart above warrants some explanation:

a) as urbanisation spreads, real GDP per capita also rise, for example, urbanisation rate only reached 20% for Malaysia in the 50s (or before, earliest data from 1964 only), Thailand in the 60s, Vietnam in the 90s, and Cambodia 2010s!

b) as Cambodia's urban development gets fast tracked with Chinese expertise and capital (not enjoyed by fellow SEA peers back then), we expect a minimum milestone of 35% urbanisation rate of at least somewhere between Vietnam and Thailand (dotted blue arrow above) by 2039 and correspondingly a real per capita GDP growth of 4.8%  from 2021 to 2039;

c) however, if the current rapid speed of growth is maintained (ie same slope as the past few years – see solid blue arrow) rather than at the slower rate between Thailand/Vietnam, then a far higher level of per capita GDP might be achievable. When Cambodia reaches 35% urbanisation, a per capita GDP growth of 8.6% may be achieved in the same time... The only proviso is that this level of GDP was only reached by Thailand when it hit 52% urbanisation, and Malaysia when it reached 57%, a tall order...

In either case, we now have a good range to go by as our guide of future growth in Cambodia: 4.8-8.5% real GDP growth - per capita! This is very substantial indeed as in nominal and whole-country terms the numbers will be much higher.

Youngest populations in Asia, and almost growing the fastest

Not surprisingly given the recent history of the country, Cambodia has one of the youngest populations in Asia, at a median age of 26.5, just clipped by Philippines at 24.5:

Chart 3:Cambodia’s population is young and growing fast

The country is also growing the fastest amongst the SEA cluster, at a 1.2% p.a. growth rate. Surprisingly Thailand is now looking quite 'middle age', with median age at 39 and growth rate a meagre 0.2%... perhaps not an investment destination for high growth anymore?

Retail consumption also growing fast

With rising wealth, there should come rising spending. Using the GDP forecast (4.8-8.6% p.a.) we have arrived at above, it is not difficult to estimate the growth rate of retail consumption as well:

Chart 4:Cambodia’s domestic consumption likely track GDP growth 

Given how consistent the GDP-consumption relationship holds in other jurisdictions, we should see Cambodia's real consumption rise by a similar magnitude of 4.6-8.2% per annum in the next 18 years as shown by the vertical orange arrows in Chart 4. For retail property investment, we should consider the additional compounding effect due to urbanisation, which will concentrate more of that same spending power in city areas. Even though many big developers are building mega malls which rival some of the monsters seen in developed markets, well located future Orchard Roads (SGP) / Nathan Roads (HK) of Phnom Penh will be sure to emerge – for the savvy investor the returns will be truly significant.

As a true representation of the property market at large, one cannot avoid looking at how home prices have tracked, sadly there are only 2 years worth of data for us to look at. Interestingly it seems the turn south for Phnom Penh prices (red line) could be a result of oversupply compared to rest of the country which is less over built, and thus continuing to rise to new highs:

Chart 5:PP’s Residential price seeing a correction – perhaps a good time to research and wait for a next cycle trough…

In summary, the macro tailwinds are very strong indeed, but micro supply issues will make stock picking most crucial for successful property investing. On top of these, this country also poses additional challenges of ownership structuring (e.g. ground floors still off limits to foreigners except with nominees or trust arrangements) and politics remain a subject in need of detailed study.