f these temples in the border area – Prasat Ta Muen Thom and Preah Vihear – has had Cambodia and Thailand at each other’s throats. It isn’t pretty, and it has begun to have a meaningful effect on both tourism and retail trade. The consequences of the cross-border conflict for the economy and for retail are material, even as both sides agreed to a ceasefire on Monday. Over 300,000 people have been displaced from their homes, and cross-border commerce has not yet returned to normal. This threatens 500 million Thai baht worth of trade every day and wreaks havoc with supply chains. Merchandise not getting across through the usual land channels includes consumer food staples like milk and soft drinks, and raw materials for the production of apparel and footwear, upon which factories on the Cambodian side depend. Components for the automotive and electronics industries are also affected. It isn’t only goods that aren’t getting across, it’s people as well, including merchants who sell at opposite sides of the border, labourers from Cambodia coming across to work in the factories in Greater Bangkok, and sick Cambodians travelling to Thai hospitals to access superior medical treatment. Tourism is floundering Retailers in both countries will feel the effects of a decline in tourism, both domestic and international. Fortunately, commercial air transport between the two countries has continued as normal, servicing the northern Cambodian city of Siem Reap (the modern city attached to the ancient Angkor ruins) and the capital, Phnom Penh. Both destinations are critically important to Cambodia’s tourism appeal. However, the impact on sentiment in Thailand may be significant. People are reluctant to book travel to conflict zones, even if they will be far away from where the action is happening. The collapse of a skyscraper in the middle of Bangkok, triggered by the earthquake in Myanmar in late March, doesn’t help. Thailand’s retailers and economy in general are heavily dependent on international and domestic tourists, and the numbers are down this year as the country strives to get tourism up to its pre-pandemic level. The government has been at pains to put the word out that the country is safe and that the hostilities are restricted to an area out in the sticks where tourists don’t typically go. Although Thailand remains one of the most touristed countries in the world, arrivals are flagging. In the first half of the year, the country received 16.6 million international tourists, 5 per cent fewer arrivals than in the corresponding period last year. The government is particularly anxious about the decline in tourists from China, whose travel plans have been negatively influenced by the safety issue, as well as weak sentiment over the Chinese economy. The Tourism Authority of Thailand (TAT) had originally expected 6.9 million tourists from China this year and has now revised that down to 5 million. Lately, China has lost its spot as the top source of international tourists to Thailand; that honour now goes to Malaysia, but Malaysians don’t spend nearly as much when they travel as the Chinese do. As a result of the weaker-than-expected first-half performance, the Thai government’s goal of generating 3.5 trillion baht in tourism spending this year is well and truly in jeopardy. That is a blow to retailers in the big tourism centres of Bangkok, Pattaya, Chiang Mai and Phuket, particularly, but also in secondary locations like Hua Hin and Krabi. Data from the Ministry of Tourism and Sport for 2023 showed that 18 per cent of tourist spending is on retail merchandise, including souvenirs, while another 23 per cent is on food and beverage. Hostilities have ended, but how much damage has been done? At the time of writing, at least 40 people have died in the conflict, with aerial bombings by the Thai air force and rockets coming from the Cambodian side, one of which took out a petrol station and killed a half-dozen people. Nonetheless, hostilities have ceased, thanks in part to a call from US President Donald Trump suggesting that there would be no continuance of trade negotiations with the two countries until they stopped fighting. The longer-term problem for retailers in this region is not the latest conflict, earthquake or the alarming frequency with which tourists come off their motorbikes or fall inexplicably from high up on their hotel balconies at 4am. It’s really China, and whether or not the sea change in travel and consumer spending that has occurred among Chinese nationals is permanent or temporary. For all their differences, the Thais and Cambodians agree on one thing: They both want the Chinese back. Further reading: King Power’s retreat: Thailand’s duty-free giant faces its moment of reckoning