Cambodia's trade with Vietnam has increased, with a reduction in the bilateral trade deficit. However, the relationship remains imbalanced. Cambodia exports raw materials while importing higher-value goods, affecting its agricultural potential.
ASEAN initiatives like the ASEAN Economic Community have not fully benefited Cambodia due to limited production and export capacity. From January to November 2024, trade between Cambodia and Vietnam reached US$7.08 billion, a 20.6% increase. Vietnam is Cambodia's second-largest export market, with exports of US$3.29 billion, primarily cashews, corn, bananas, mangoes, tobacco, rice, and rubber. Vietnam's exports to Cambodia, valued at US$3.79 billion, include building supplies, machinery, fuel, electronics, fertilizers, animal feed, vegetables, and fruits
Cambodian farmers face low selling prices and high production costs for fertilizers, fuel, and machinery. Vietnam imports raw materials at lower prices and processes them for export. Rice is Cambodia's primary agricultural product, occupying nearly 70% of cultivated land. The government aims to enhance productivity and diversify exports towards higher-value products. Agriculture's GDP contribution decreased from 50% in the early 1990s to about 22% in 2023 but still accounts for nearly 40% of employment.
Cambodia imports fertilizers from Vietnam, Thailand, China, Japan, and South Korea. Rising fertilizer costs and living expenses pose challenges. Cambodia exports raw materials, limiting agricultural benefits. Commodities like cassava, rubber, and cashews are exported to Vietnam for processing. In 2022–23, Cambodia exported over 3.5 million tonnes of paddy rice to Vietnam, processed and exported to markets like Europe and ASEAN countries.
Challenges in job creation, income growth, economic diversification, and industrial development arise from reliance on raw material exports. Developing value-added industries like packaging and food processing remains an underexplored opportunity. In 2024, 95% of raw cashew nuts were exported, leaving only 5% for domestic processing, resulting in value loss for farmers, traders, and communities.
Cambodia's limited domestic processing capacity allows Vietnam to dominate the value-added stage of agricultural exports. High export costs and stringent global market entry requirements compound this situation. Electricity costs are among the highest in the region, and the education system lacks specialized training in food technology and agro-industrial engineering.
To develop a strong agro-processing industry, Cambodia must reduce electricity and logistics costs. Investment in modern food processing technology would improve efficiency and product quality, opening international market access. Developing a skilled workforce in agro-industrial engineering is essential for sustaining technological advancements. Expanding financial access through targeted incentives and low-interest loans can attract investment in processing facilities. Strengthening branding and export strategies is necessary to shift from raw exports to high-value agricultural products.
Cambodia's growing trade with Vietnam presents challenges and opportunities. As ASEAN removes regional trade barriers, Cambodia is losing its competitive advantage in agricultural products to Vietnam, leading to high expenses and low incomes for its citizens.
Source: East Asia Forum