Royal Phnom Penh Universities Cambodian Review of Southeast Asia 2025: Security Shocks, Economic Resilience, and Strategic Balancing

By Nory Ly

Cambodia’s 2025 was defined by a convergence of internal security pressures and an external shock that rapidly re-ordered national priorities.

Domestically, the Royal Government’s intensified campaign against online scam operations—formalized through a July 2025 nine-point order and followed by large-scale raids and detentions across multiple provinces—signaled a sharpened focus on transnational crime, governance credibility, and internal control.

At the same time, a sudden escalation of the long-running Cambodia–Thailand border dispute became the central political and security event of the year, generating significant civilian displacement, disruption to livelihoods, and a securitized domestic atmosphere that narrowed civic space while amplifying nationalist messaging.

These security dynamics intersected with an economy that remained broadly resilient but lost momentum under compounded shocks. Growth forecasts were revised downward into the mid-4% range as trade, tourism, and labor markets absorbed the effects of border instability, while macro fundamentals—foreign reserves, inflation management, and public debt—continued to provide policy buffers.

Externally, Phnom Penh pursued a pragmatic foreign policy shaped by crisis management and strategic balancing: working ASEAN channels during the conflict, deepening “all-weather” ties with China, engaging the United States where interests aligned (including crisis diplomacy), and sustaining economic partnerships with Japan, the EU, and regional neighbors.

This review assesses these developments across domestic, socio-economic, and foreign affairs, highlighting how security shocks influenced governance choices, economic performance, and Cambodia’s diplomatic posture through 2025.

Domestic Affairs

Online Scam Operations

On 15 July 2025, the Royal Government of Cambodia released a nine-point order on online scam crackdowns. Since the announcement, the government, including local authorities, conducted operations resulting in the arrest or detention of at least 2,043 individuals across multiple provinces, including Phnom Penh, Kampong Speu, Sihanoukville, Tbong Khmum, Kratie, Banteay Meanchey, and Svay Rieng.

Summary of Major Crackdown Operations (July–December 2025)

Compiled by the author (from the issuance of the nine-point order through mid-December 2025).

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Cambodia–Thailand Border Conflict

Cambodia’s security environment in 2025 was dominated by the sudden escalation of a long-running border dispute with Thailand.

Tensions intensified in late May 2025 following a skirmish in Oddar Meanchey Province that resulted in the death of a Cambodian soldier. By mid-July, clashes escalated into the most serious fighting in years. Between 23–27 July, artillery exchanges and airstrikes along the 817-kilometer frontier reportedly killed at least 48 people—mostly civilians—and displaced approximately 300,000 Cambodians.

Emergency curfews were declared, shelters expanded rapidly, and both sides reinforced troop deployments. Mediation efforts led by ASEAN Chair Malaysia and supported by U.S. diplomacy produced a temporary ceasefire on 28 July.

Hostilities resumed later in the year. In October 2025, Cambodia and Thailand signed a new peace accord facilitated by U.S. President Donald Trump. That agreement collapsed in November following a landmine incident injuring Thai soldiers. On 7 December, fighting resumed, with Thai F-16 airstrikes and Cambodian BM-21 rocket responses.

By 16 December 2025, Cambodian authorities reported:

• 438,953 displaced persons
• 17 civilian deaths
• 77 civilian injuries
• Destruction of Victory Bridge (Me Teuk Bridge), severing National Road 55
• Airstrikes occurring within 90 km of Angkor Wat

The government consistently called for negotiations while asserting sovereignty and mobilizing domestic security measures. Nationalist messaging intensified, and border security was tightened nationwide.

Socio-Economic Affairs

Macroeconomic Performance

Cambodia’s economy remained resilient but slowed in 2025. After 6.0% growth in 2024, GDP growth was revised downward to approximately 4.8–4.9% due to border disruptions, trade uncertainty, and weaker tourism.

Key macro indicators remained stable:

• Foreign reserves: ~7.5 months of imports
• Public debt: ~26% of GDP
• Inflation: Averaged ~2.7% in 2025
• Exchange rate: Stable under managed regime

Sectoral Performance

Industry
Manufacturing led growth. Garment exports surged over 20% year-on-year in early 2025, driven by front-loaded orders amid U.S. tariff uncertainty. Industry output growth was projected at 7.9%.

Services
Tourism and retail were subdued. Thai tourist arrivals fell sharply, and services growth slowed to around 2–3%.

Agriculture
Agriculture grew modestly (~1.1%), supported by rice, cassava, and cashew exports. The return of nearly one million migrant workers from Thailand eased labor shortages but placed pressure on rural incomes.

Labor and Livelihoods

Approximately 900,000–1,000,000 migrant workers returned from Thailand during the conflict. Many faced unemployment, straining rural economies and social protection systems. International organizations called for emergency cash transfers, retraining, and job placement programs.

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Foreign Affairs

ASEAN and Regional Engagement

Cambodia worked through ASEAN channels during the conflict, welcoming mediation by Malaysia and supporting ASEAN centrality. A peace accord was signed during the October 2025 ASEAN Summit, though it later collapsed.

Bilateral Relations

China
Cambodia deepened its “all-weather” partnership with China. Over 30 agreements were signed in 2025, and bilateral trade exceeded USD 17 billion in the first 11 months.

United States
Relations were pragmatic. U.S. diplomacy played a key role in ceasefire efforts, and Cambodia publicly acknowledged this involvement. The U.S. remained Cambodia’s largest export market.

Vietnam
Relations remained strong, with bilateral trade reaching USD 6.58 billion (Jan–Oct). Cooperation expanded in infrastructure and security coordination.

Thailand
Relations deteriorated sharply. Border closures, trade disruptions, diplomatic expulsions, and nationalist rhetoric dominated bilateral ties.

Japan and EU
Japan expanded trade and investment, while the EU supported Cambodia’s agriculture sector through an €80 million investment program.

Trade Overview (2025)

Multilateral Engagement

Cambodia remained active in ASEAN, Mekong-Lancang Cooperation, RCEP, WTO dialogues, and UN frameworks. Preparations for graduation from Least Developed Country status continued, requiring regulatory alignment and reform.

Conclusion

Cambodia closed 2025 having weathered a year in which security contingencies repeatedly drove the national agenda.

The state’s anti-scam campaign demonstrated operational capacity but raised questions about long-term institutional solutions. The Cambodia–Thailand border conflict exposed unresolved territorial and crisis-management mechanisms, with civilians bearing the heaviest costs through displacement and livelihood disruption.

Economically, resilience rested on pre-existing buffers and industrial exports, but structural vulnerabilities were underscored—particularly dependence on external demand and exposure to geopolitical shocks.

Diplomatically, Cambodia pursued pragmatic hedging, leveraging ASEAN mechanisms, deepening ties with China, engaging the United States where interests aligned, and sustaining partnerships with Japan and the EU.

Looking ahead to 2026, durable normalization will require credible border de-escalation, renewed demarcation diplomacy, targeted protection for displaced populations and returnees, and a sustained governance response to transnational crime that strengthens institutions beyond episodic enforcement.

Nory Ly is a Researcher at the Center for Southeast Asian Studies (CSEAS) and a Lecturer at the Department of International Relations, Institute for International Studies and Public Policy (IISPP), Royal University of Phnom Penh (RUPP). She holds a MSc in International Security from the University of Bristol through Chevening Scholarship 2023/24. Her research area focus on Cambodia’s security policy and Southeast Asian security.