Thailand-Cambodia Border Clashes: The Role of Supply Chains

The Diplomat

a day ago

The border conflict between Thailand and Cambodia, which flared up at the end of May, involved an series of tit-for-tat actions by the respective governments, before the situation eased somewhat following July peace talks held in Malaysia in the presence of the United States and China. Yet while the talks did produce an agreement, it remains to be seen how well the truce will hold.
Given its current status as ASEAN chair, Malaysia acted as mediator. As a bloc, ASEAN is noted for the respect it accords sovereignty. Yet the bloc also needs peace and stability given its focus on development and its need for foreign investment. Supply chains are a particularly critical development component for ASEAN countries. So while any border conflict between member countries does of course become a matter of sovereignty, if the problem worsens, it has the potential to impact the economic development of all member countries and in turn raise questions about the raison d'être of ASEAN itself. That naturally creates demand for a prompt resolution.
U.S. President Donald Trump used the tariff issue as leverage to demand an immediate cessation of hostilities from both Thailand and Cambodia. Having seen Chinese companies moving into Southeast Asia as a way to get around the U.S. tariffs on China, Washington is now looking to impose high tariffs on Southeast Asian countries. For its part, Beijing is keen to demonstrate its presence as a major regional player, and to do that it has adopted a position of supporting ASEAN centrality. At the recent peace talks, Malaysian Prime Minister Anwar Ibrahim sat in the center, with the Cambodian and Thai representatives on either side. Both the United States and China sat behind Anwar. However, China's involvement was not only political and diplomatic, but also economic.
China has been actively involved in the peace process. On July 14-16, at the invitation of the Cambodian People's Party, Chen Zhou of the International Department of the Chinese Communist Party led a delegation to visit Cambodia and meet with Prime Minister Hun Manet and senior officials of the People's Party. About ten days later, on July 27, a Foreign Ministry spokesperson called for an immediate ceasefire from both countries for the sake of stability in the Southeast Asian region as well as for the peoples of Thailand and Cambodia. On July 28, Thai Acting Prime Minister Poonam Vejchaichai and Cambodian Prime Minister Hun Manemet met near Kuala Lumpur, Malaysia and agreed on an immediate, unconditional ceasefire. In attendance were Anwar and the American and Chinese ambassadors to Malaysia as mediators. On July 30, Chinese Vice Foreign Minister Sun Weidong met with Thai and Cambodian officials in Shanghai. This was arranged to coincide with the two sides joining the Lancang-Mekong Summit. China, at least on the surface, assumed a position of being happy to mediate if requested by both Thailand and Cambodia. This was primarily to demonstrate Beijing's respect for ASEAN, but it also served to make China visible as a conflict solver in the region along with the United States.
As noted, though, China had an additional, economic motive to address the border conflict. China has improved connectivity by developing a 'North-South Corridor' that includes railways and roads from mainland Southeast Asia to Yunnan Province and elsewhere. If connectivity between Thailand and Cambodia is severed at their border, it would cause major supply chain issues. Additionally, if the border conflict becomes part of the U.S. tariff issue and tariff negotiations stall because the border issue remains unresolved, Chinese companies that have expanded to Cambodia and export to the United States will be at a grave disadvantage. China has thus had good reason to mediate a resolution of the border issue.
What about Japan's role? One could say that Japan has been diligently playing the role of stage hand. Still, the border issue between Thailand and Cambodia has considerable economic significance for Japan, too. Many Japanese companies, especially in the automotive industry, which had earlier expanded into Thailand have been prompted by rising wages in that country to move into Cambodia as a 'Thailand + 1' country. The Japanese government also views the 'East-West Corridor' in mainland Southeast Asia as important, which is why it has been developing the east-west expressway network, among other initiatives. Japanese companies have made use of this East-West Corridor to set up factories in both Cambodia and Thailand, but a border conflict between Thailand and Cambodia could sever the corridor. Indeed, since the conflict began, Japanese companies have tried to maintain connectivity between factories in the two countries through sea routes and other means. This has been plagued by high costs and customs processing limitations, resulting in production delays.
On July 24, Japanese Foreign Minister Iwaya Takeshi released a statement, saying that the '(Government of Japan) expresses deep concern' and that 'tensions have persisted between the two countries, including restrictions on the movement of people and goods across the border. Japan has been working to encourage both countries to de-escalate the situation.' Clearly, Japan views the impact on the movement of people and goods across the border as a major problem.
Whether North-South or East-West, maintaining connectivity within ASEAN is crucial not only for ASEAN itself but also for both Japan and China, with the two countries deeply involved in the regional economy. The result has been that Japan and China have cooperated to contain the Cambodia-Thailand situation. There is still much debate about the degree to which close economic relations truly help prevent conflicts, but at least in this case they appeared to help, partly because of Cambodia's own emphasis on development. If the potential supply chain disruptions were not such a critical factor, the outcome may have been quite different.
KAWASHIMA Shin is a professor at the University of Tokyo.