By Mom Mit, Prom Thary and Meas Somica
Cambodia’s trade with Vietnam has increased significantly, with a noticeable reduction in the bilateral trade deficit over time. But the relationship remains imbalanced, with Cambodia heavily reliant on exporting raw materials while importing higher-value goods. This dynamic has left Cambodia unable to fully capitalise on its agricultural potential, putting its farmers and economy at a disadvantage.
While ASEAN promotes trade among its members through initiatives like the ASEAN Economic Community, small states like Cambodia struggle to benefit due to limited production and export capacity.
From Cambodia’s perspective, ASEAN is standing by as Vietnam imports raw materials from Cambodia, rather than helping the Kingdom develop its own agro-processing industry. From January to November 2024, trade between Cambodia and Vietnam reached US$7.08 billion, a 20.6 per cent increase, making Vietnam Cambodia’s second-largest export market behind the United States. Cambodia’s exports to Vietnam reached US$3.29 billion, up 26.3 per cent, mostly consisting of cashews, corn, bananas, mangoes, tobacco, rice and rubber. Vietnam’s main exports to Cambodia, worth US$3.79 billion, include building supplies, machinery, fuel, electronics and electrical equipment, fertilisers, animal feed, vegetables and fruits.
Unprofitable Due To Low Selling Prices & High Production Costs
Cambodian farmers produce agricultural products, but these goods are often unprofitable due to low selling prices and high production costs of fertilisers, fuel and machinery. Vietnam benefits from Cambodia’s limited industrial capacity, importing raw materials at lower prices and processing them into finished goods for export to global markets like Europe and China under Vietnam’s own branding.
Rice is Cambodia’s primary agricultural product, occupying nearly 70 per cent of cultivated land, with subsidiary and industrial crops at 19 per cent, rubber at 7 per cent and permanent crops at 4 per cent. The country has significant potential for high-value agricultural exports due to its fertile land and favourable climate. Government initiatives have focused on enhancing productivity and diversifying exports towards higher-value products. Although agriculture’s contribution to GDP has decreased from 50 per cent in the early 1990s to about 22 per cent in 2023, it still accounts for nearly 40 per cent of employment.
But the Kingdom heavily relies on sourcing fertilisers from neighbouring countries, including Vietnam (US$207 million), Thailand (US$139 million), China (US$12 million), Japan (US$5.61 million) and South Korea (US$1.61 million). Despite this, farmers and other individuals continue to encounter difficulties, such as the rising cost of fertiliser and high living expenses.
Cambodia is primarily reliant on raw material exports, limiting its agricultural benefits. Farmers grow lucrative commodities such as cassava, rubber and cashews, but they are frequently exported to Vietnam for processing. In 2022–23, Cambodia exported over 3.5 million tonnes of paddy rice to Vietnam, where it is processed and then exported to international markets. These include Europe and some ASEAN countries such as the Philippines, Indonesia and Malaysia — Vietnam’s largest rice export markets.
Cambodia has enough rice mills capable of meeting international export standards, but lacks capital to purchase rice grains for stocking and production and struggles to reduce processing costs, particularly in transportation. Cambodian farmers encounter challenges such as low yields due to outdated techniques, limited access to advanced technology and high production costs. As a result some farming households in Takeo, Kandal, Prey Veng and Svay Rieng have decided to rent their farmland to Southwestern Vietnamese farmers for rice cultivation.
Significant Value Loss For Farmers, Traders & Local Communities
Cambodia faces challenges in job creation, income growth, economic diversification and industrial development, largely because it relies heavily on exporting raw materials. Developing value-added industries, such as packaging and food processing, remains a significant underexplored opportunity. In 2024, 95 per cent of raw cashew nuts were exported, leaving only 5 per cent for domestic processing. This leads to significant value loss for farmers, traders and local communities.
Cambodia’s limited domestic processing capacity allows Vietnam to dominate the value-added stage of its agricultural exports. This situation is further compounded by high export costs and stringent entry requirements for processed agricultural goods in global markets. Electricity is a crucial input for processing, yet Cambodia has one of the highest costs of electricity in the region. The education system also lacks specialised training in food technology, quality control and agro-industrial engineering.
To develop a strong agro-processing industry, Cambodia must reduce electricity and logistics costs to boost local competitiveness. Investment in modern food processing technology would improve efficiency and product quality, opening doors to international markets. 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. There is also a need to strengthen the country’s branding and export strategies, shifting from raw exports to high-value agricultural products. These actions are expected to boost industrial growth, generate employment opportunities and consolidate Cambodia’s position in global trade.
Cambodia’s growing trade with Vietnam presents both challenges and opportunities. As ASEAN removes regional trade barriers, the Kingdom is losing its competitive advantage in agricultural products to Vietnam, leaving citizens facing high expenses and low incomes.
Mom Mit recently graduated with a master’s degree from the Department of Strategic and Innovative Development at the Financial University, Moscow.
Prom Thary is a PhD Scholar in Political Science at RUDN University, Moscow. He holds a master’s degree in political science from Saint Petersburg State University, Russia, and a master’s degree in law from UME University, Cambodia. He currently serves as a civil servant at Cambodia’s Ministry of Interior.
Meas Somica is an experienced agriculture professional with over a decade of expertise in the sector.
He is currently pursuing a master’s degree in climate change science. This article was first published on the East Asia Forum
