Cambodia’s trade with Vietnam has surged in recent years, with bilateral trade expanding by over 20 per cent in 2024. However, the trade relationship remains deeply imbalanced, with Cambodia continuing to export primarily raw materials while importing higher-value manufactured goods. This dynamic has left Cambodian farmers and industries struggling to reap the full benefits of their country’s agricultural potential, exacerbating economic challenges and limiting industrial growth.
While Cambodia has embraced regional economic integration through the ASEAN Economic Community (AEC), it remains on the weaker side of the trading relationship. The country’s underdeveloped industrial sector and high production costs have allowed Vietnam to dominate the value-added stage of agricultural exports, benefiting from cheap raw materials sourced from Cambodian farms. This pattern, if left unaddressed, may prevent Cambodia from fully realizing its potential as a major agricultural exporter.
From January to November 2024, Cambodia and Vietnam recorded a total trade volume of US$7.08 billion, marking a 20.6 per cent increase compared to the previous year. Vietnam is now Cambodia’s second-largest export market, trailing only behind the United States. Cambodia’s exports to Vietnam were valued at US$3.29 billion, representing a 26.3 per cent rise. However, the trade balance remains skewed in Vietnam’s favor, with its exports to Cambodia amounting to US$3.79 billion.
The bulk of Cambodia’s exports to Vietnam consists of raw agricultural products, including cashews, corn, bananas, mangoes, tobacco, rice, and rubber. Meanwhile, Vietnam exports higher-value goods to Cambodia, including building materials, machinery, fuel, electronics, fertilisers, animal feed, and processed agricultural products. This imbalance means that while Cambodia supplies Vietnam with raw materials, it relies on imports for essential goods that are critical to its own production.
Cambodian Farmers Struggle to Profit
Cambodian farmers produce large quantities of agricultural goods, yet profitability remains a major concern due to low farm-gate prices, high production costs, and limited processing capacity. Fertiliser, machinery, and fuel costs remain prohibitive, making it difficult for farmers to scale up or improve efficiency.
Vietnam benefits significantly from Cambodia’s agricultural output, importing raw materials at lower prices, processing them, and then exporting finished products to markets worldwide, including Europe and China. Rice, Cambodia’s primary agricultural commodity, illustrates this problem. In 2022–2023, Cambodia exported over 3.5 million tonnes of paddy rice to Vietnam, where it was milled, branded under Vietnamese companies, and then exported to countries such as the Philippines, Indonesia, and Malaysia.
Although Cambodia possesses modern rice mills that meet international export standards, they remain underutilized due to a lack of working capital to purchase rice grains for storage and production. High transportation costs further hinder competitiveness, forcing Cambodian farmers to sell at low prices rather than risk holding onto their crops.
In response to these challenges, some Cambodian farmers—especially in the provinces of Takeo, Kandal, Prey Veng, and Svay Rieng—have begun leasing their land to Southwestern Vietnamese farmers, allowing them to cultivate rice on Cambodian soil. While this provides short-term financial relief for local farmers, it raises concerns about long-term land control and economic dependency.
Another major issue affecting Cambodia’s agricultural sector is its dependence on imported fertilisers, seeds, and farming equipment. In 2024, Cambodia sourced US$207 million worth of fertilisers from Vietnam, followed by imports from Thailand (US$139 million), China (US$12 million), Japan (US$5.61 million), and South Korea (US$1.61 million).
The heavy reliance on foreign fertilisers and chemicals leaves Cambodian farmers vulnerable to global price fluctuations. Rising input costs, coupled with stagnant selling prices, have eroded profit margins and discouraged small-scale farmers from expanding their production. Without a domestic fertiliser industry or state subsidies, Cambodia remains at the mercy of external suppliers.
Agro-Processing and Industrial Development
One of Cambodia’s most pressing economic challenges is its lack of value-added processing industries. The country primarily exports raw commodities like cassava, rubber, and cashews, but 95 per cent of raw cashew nuts are shipped abroad, mostly to Vietnam, for processing. Only 5 per cent is processed domestically, resulting in significant revenue loss for farmers, traders, and local businesses.
Developing an agro-processing sector would allow Cambodia to retain more value within its borders by producing packaged and processed agricultural goods rather than selling raw materials. However, several barriers prevent this transformation:
- High Electricity Costs: Cambodia has some of the highest electricity prices in Southeast Asia, making food processing operations expensive and uncompetitive.
- Limited Industrial Infrastructure: The country lacks large-scale food processing plants, packaging facilities, and cold storage required for high-value exports.
- Skills Shortage: There is a lack of specialised training in food technology, quality control, and agro-industrial engineering, limiting the development of a skilled workforce in the sector.
- Restricted Financial Access: Small and medium enterprises (SMEs) in the agro-processing industry struggle to secure low-interest loans and investment capital, hampering expansion.
- Export Barriers: Processed agricultural products must meet stringent quality, safety, and certification standards for entry into global markets, posing a challenge for Cambodian businesses.
To break out of this cycle, Cambodia must prioritise industrial development by:
- Lowering electricity costs to improve competitiveness.
- Investing in modern food processing technology to enhance efficiency and product quality.
- Training a skilled workforce to sustain technological advancements.
- Providing financial incentives and subsidies for agro-processing firms.
- Strengthening branding and export strategies to shift from raw exports to high-value agricultural products.
Asean: Is Cambodia Being Left Behind?
While ASEAN promotes trade liberalisation, the benefits have been uneven. Countries with stronger industrial and processing capabilities, like Vietnam, have gained more from regional integration, while Cambodia remains largely an exporter of raw materials.
From Cambodia’s perspective, ASEAN has not done enough to address these structural inequalities. Instead of simply facilitating the movement of raw materials from Cambodia to Vietnam, ASEAN could take a more active role in developing Cambodia’s agro-processing sector by:
- Encouraging foreign direct investment (FDI) in Cambodian food processing industries.
- Facilitating technology transfer and industrial cooperation between ASEAN members.
- Providing funding for rural infrastructure development to reduce logistics costs.
- Promoting fairer trade policies that allow Cambodian agricultural producers to retain more value from their exports.
Without targeted interventions, Cambodia risks being permanently locked into a low-value agricultural economy, while Vietnam continues to strengthen its dominance in agro-processing and global trade.
Cambodia’s growing trade with Vietnam presents both opportunities and challenges. While increased trade volume signals economic engagement, Cambodia’s reliance on raw material exports limits its long-term growth potential. Farmers face high input costs, low selling prices, and limited access to modern technology, preventing them from maximizing profits.
To reduce dependency on Vietnam and gain greater control over its agricultural economy, Cambodia must invest in agro-processing, infrastructure, and workforce development. The government must work to lower production costs, attract investment, and promote domestic industrialisation. Without these reforms, Cambodia risks remaining a supplier of raw materials while neighbouring countries reap the rewards of value-added processing.
As ASEAN continues to break down regional trade barriers, Cambodia must act swiftly to secure its place as more than just a provider of raw goods—it must become a key player in Southeast Asia’s processed food industry.
