From Rules to Muscles
Issue 33 — Key Developments Across Cambodia, Laos, Myanmar, and Thailand
Editor’s Note
by Mattia Peroni, Lead Editor - Mekong Belt Desk
The World Economic Forum offered a clear message as 2026 begins: the rules-based order is giving way to a world where power, leverage, and enforcement matter more than formal commitments. As global politics harden, the Mekong’s long-standing governance gaps—weak regulation, uneven enforcement, and fragile institutions—are no longer background noise, but strategic liabilities. For Thailand, such liabilities risk undermining the country’s trajectory as a reliable small power that middle and great powers can count on: without deeper reforms, Thailand may struggle to distinguish itself as a reliable alternative trading partner in a world where FDI is becoming even more crucial for small powers. Similarly, Cambodia’s economic reform is gathering speed, with tax changes, record investment inflows, and deeper regional integration reshaping how businesses operate. Yet as growth diversifies and the digital economy expands, the real test lies in whether new rules—from capital gains taxation to SME finance—are matched by the institutional capacity to enforce them fairly and help smaller firms adapt. This gap between formulating rules and having the muscles to enforce them is most evident in Laos, where air pollution policy remains stuck at the rule-making stage: burn bans return each dry season, but enforcement capacity and farming alternatives lag behind in a cycle of regulation without the muscle to make it stick. Finally, as the world order transitions into a phase dominated by power struggles, the rule of law faces an important test in The Hague, where Myanmar is asked to account for genocide even as the country itself is falling apart, exposing the widening gap between international justice on paper and protection on the ground.
Thailand 🇹🇭
Thailand After Davos
by Satid Sootipunya, in Bangkok
The World Economic Forum 2026, one of the most hectic weeks for policymakers, CEOs, and world leaders, has come to a close. The world has just witnessed the very obvious shift of the world’s order from the “Rules-based Era” to the Power Accumulation Era, a transition that accelerated following U.S. President Donald Trump’s inauguration in January 2025.
President Trump’s remarks at the forum reflected a world no longer guided primarily by free trade and globalization norms established after World War II. Instead, countries are increasingly expected to protect themselves against states with superior economic and military power. The European Union (EU) is a very clear example of this new paradigm, having been “forced” by President Trump in early 2025 to increase its defense spending to reach 5% of its GDP.
This raises the question of what will happen to middle and small-power countries after the shift. According to the Founder and CEO of Bitkub Capital Group Holdings Company Limited, Mr. Jirayut Subsrisopa, who gave a special interview to Krungthepturakij during the Davos conference, the world’s hierarchy will be defined by each country’s military power. At the top sit the so-called great powers—the United States, China, and India—followed by middle powers such as the EU. Small powers, including Southeast Asian countries and ASEAN members, occupy the lowest tier and have limited influence over global decision-making.
Mr. Jirayut Subsrisopa said that Trump’s maneuvers show how the world is now shaped by great powers seeking to maximize national gains, while middle powers are compelled to unite to defend their interests and preserve elements of the world order that they are used to. Small powers, by contrast, risk being sidelined in major global discussions.
In terms of trade, small powers like Thailand, Vietnam, Indonesia, and Malaysia will be perceived as a tool to diversify risks out of any nation that is not reliable. Therefore, this situation may be an advantage for Thailand and other peer nations in ASEAN to attract flows of Foreign Direct Investments (FDIs), which will later on help boost the Thai economy to grow more than what the International Monetary Fund (IMF) predicts at 1.5-1.6% in 2026.
However, ASEAN nations still need to be aware that their fortune might come from being perceived as a safe trade diversification destination for the world’s heavyweights. Therefore, if any countries in the bloc are not ready in terms of infrastructure, political environment, and maintaining a high standard of governance, the FDIs can shift to other countries in the same bloc with more readiness.
For Thailand, despite the presence of senior officials from the Ministries of Finance, Commerce, and Foreign Affairs at Davos to promote trade ties with Europe, persistent political uncertainty, shortages of high-skilled labor, and sluggish economic growth remain significant constraints. Without deeper reforms, Thailand may struggle to distinguish itself as a reliable alternative trading partner.
Taken together, Davos risks becoming little more than a public relations stage for Thailand unless the country moves decisively to overhaul both its economic structure and political foundations.
Satid is a multimedia economic journalist and news anchor who covers macroeconomic trends, Thailand’s fiscal policy, and key regional developments for Bangkok Biz. A Journalism graduate from Thammasat University, he has reported on major issues such as the US–China trade tensions, the Myanmar crisis, and global corporate stories, drawing on prior newsroom experience at The Momentum, the Bangkok Post, AFP, and Varasarn Press. His work blends economic analysis, foreign affairs, and digital storytelling, with a strong focus on making complex financial and political topics accessible to Thai audiences.
Cambodia 🇰🇭
Cambodia Sets Its Economic Direction at the Start of 2026
by Sokna Thea, in Phnom Penh
Cambodia enters 2026 in a phase of structural transition driven by tax reform, strong investment inflows, deeper regional trade integration, financial sector reform, and rapid digitalisation. While headline growth indicators remain positive, these shifts are reshaping how businesses operate, with SMEs facing both new compliance pressures and emerging opportunities.
Against this backdrop, the Cambodian government has deferred the application of the 20% capital gains tax on immovable property until 1 January 2027 to support a fragile real estate sector, while capital gains arising from the transfer of shares and other qualifying capital assets will become taxable from 1 January 2026. This creates new compliance and cash-flow considerations for investors and SMEs involved in share sales, business exits, and corporate restructurings, particularly given the requirement to declare and pay the tax within three months of realising a gain.
At the same time, investment activity has reached record levels, reinforcing Cambodia’s shift toward a broader manufacturing base. In 2025, approved fixed-asset investment reached about 10 billion USD across 630 projects, a 45% year-on-year increase, with an estimated 438,000 jobs expected. Although foreign-led projects, especially from China, remain dominant, their spread into provincial areas is helping create new industrial centres and more balanced income growth.
This investment momentum is closely linked to Cambodia’s deeper integration into regional supply chains. Cambodia’s trade with the Regional Comprehensive Economic Partnership (RCEP) member countries reached 40.24 billion USD in 2025, accounting for 61.6% of total trade, as tariff reductions continue to lower costs and support cross-border production networks. Despite this progress, Cambodia remains a net importer within the bloc. Imports from RCEP members reached 30.44 billion USD in 2025, while exports accounted for 9.8 billion USD. This imbalance underscores ongoing reliance on regional suppliers but also creates space for import substitution and domestic manufacturing expansion, particularly for food products, construction materials, and consumer goods.
Supporting these structural shifts, financial sector policy is increasingly focused on inclusion and productive lending. Under the Financial Sector Development Strategy 2025–2030, Cambodia is prioritising access to finance for SMEs and informal businesses by promoting secured lending and movable-asset financing, allowing firms to borrow against equipment, inventory, and receivables rather than land. At the same time, Cambodia also aims to improve in digital payments, financial reporting, and data systems, which are intended to strengthen lending quality, lower transaction costs, and support financial stability.
These reforms align with the rapid expansion of Cambodia’s digital economy, which is reshaping market access for businesses. The digital economy is growing at an estimated 15.37 percent annually, with e-commerce projected to exceed $1.78 billion by the end of 2025 and reach $2.87 billion by 2027. For SMEs, digital platforms offer direct access to consumers, though competitiveness increasingly depends on localisation, digital payment adoption, and logistics capacity.
Sokna has a background in International Affairs and Business & Commercial Law. He’s currently a Senior Project Coordinator at the Ministry of Economy and Finance of Cambodia, working on the Financial Management Information System (FMIS) Project. His professional focus is driven by entrepreneurship, business development, and financial technology, with a particular interest in how private-sector innovation drives Cambodia’s economic growth.
Lao PDR 🇱🇦
Emergency Air Pollution Measures Expose Deeper Structural Gaps
by Thipphavanh Virakhom, in Vientiane
Lao PDR has reintroduced nationwide burning restrictions for the 2025-2026 dry season, with authorities ordering a comprehensive ban on outdoor burning from January to April. The directive was detailed by the Laotian Times, aimed at containing forest fires and reducing PM 2.5 levels which reported strengthened hotspot monitoring, accelerated fire detection, and expanded responsibilities for provincial authorities. However, while this short-term intervention may curb immediate risks, it raises deeper questions about the sustainability and long-term effectiveness of the country’s air pollution governance framework.
Seasonal burning continues in upland farms, rice fields, and livestock grazing areas even though the government has repeatedly banned the practice. Eco-Business reports that PM2.5 levels in Vientiane frequently reach unhealthy or hazardous levels, driven largely by fires used for agricultural land-clearing. The continued use of burning despite official restrictions highlights persistent gaps in enforcement, as local authorities responsible for monitoring, reporting, and taking legal action often struggle with limited capacity. These constraints very widely across provinces, resulting in uneven implementation of national directives.
A multi-year FAO study on air quality in Lao PDR exposes these governance gaps. The analysis, summarised through the FAO Knowledge Repository and FAO’s national assessment, identifies agriculture-related fires as major contributors to PM2.5 pollution, particularly in northern provinces. These findings underscore how rural livelihoods—dependent on low-cost slash and burn practices—clash with national air quality objectives, revealing the absence of sufficiently resourced alternatives for farmers.
Even broader regional dynamics reflect similar tensions. The ASEAN Guidelines for Agroecology Transitions offer a long-term framework for reducing burning through sustainable farming systems, emphasising planning, farmer engagement, and value-chain transformation. Yet the gap between guideline adoption and implementation in Laos remains wide. Without stronger extension services, viable non-burning technologies, and inclusive financing, policy commitments remain aspirational.
Health-related consequences amplify the urgency. A World Health Organization spotlight on Lao PDR highlights chronic exposure to elevated PM 2.5 and links forest fires, waste burning, and transboundary emissions to compounding health risks across the country. The WHO analysis stresses the need for improved monitoring systems, stronger regulatory coherence, and sustained cross-sector collaboration, elements still developing in the national practice.
The re-imposed burn ban serves as a temporary response rather than a systematic solution, underscoring the slow pace of structural reform. In this context, lasting improvements in air-quality management will only be possible once agricultural policy, rural development planning, environmental regulation, and local governance mechanisms are fully aligned.
Thipphavanh holds a bachelor’s degree in international affairs. She is a governance and development professional specialising in rule of law, access to justice, and gender equality in Lao PDR. Her work focuses on strengthening justice sector institutions, advancing people-centred governance, and promoting gender-responsive systems. With extensive experience in project coordination, monitoring and evaluation, stakeholder engagement, and strategic communications, she has collaborated closely with national institutions and international partners to support inclusive and sustainable development.
Myanmar 🇲🇲
A Trial Without A State
by Mozart
As the International Court of Justice (ICJ) resumes hearings on the Rohingya genocide case, Myanmar faces a paradox: a global pursuit of justice unfolding as the state itself fragments under military rule and armed conflict.
More than six years after The Gambia filed its landmark case accusing Myanmar of breaching the 1948 Genocide Convention, the ICJ has reopened proceedings in The Hague. For the first time since the February 2021 coup, the hearings feature a delegation representing the junta—a regime widely condemned for committing atrocities of its own. As the case resumes, the contrast between the slow, procedural pace of international justice and Myanmar’s rapidly deteriorating reality could not be sharper.
The Gambia’s submission reiterates significant evidence of genocidal acts committed against the Rohingya between 2016 and 2017, including mass killings, sexual violence, and the destruction of hundreds of villages. It also incorporates new documentation detailing the role of hate speech propagated by ultranationalist monks such as Wirathu and Sitagu Sayadaw, alongside pro-military media outlets that helped incite violence.
Under civilian leadership in 2019, Myanmar defended itself by framing the violence as legitimate security operations against insurgents. Today, that defense is presented by generals accused of ongoing war crimes across the country, raising fundamental questions about the credibility and legitimacy of state representation before the Court.
Since the 2021 coup, Myanmar’s political landscape has fractured beyond recognition. In Rakhine State—once the epicenter of the Rohingya genocide—the Arakan Army (AA) and its political wing, the United League of Arakan (ULA), now control much of the territory, governing populations that include both Rakhine Buddhists and the remaining Rohingya Muslims. Human rights groups report that neither the military nor the AA has provided meaningful guarantees of protection for Rohingya communities, with each side accusing the other of abuses. As one activist put it, “Rulers change, but vulnerability remains.” Amid renewed clashes involving Rohingya armed groups, displacement continues and humanitarian access is increasingly restricted.
The hearings also underscore the widening gap between international law and conditions on the ground. In 2020, the ICJ ordered Myanmar to prevent acts of genocide and preserve evidence, but these provisional measures remain largely unenforced as the junta escalates violence nationwide. At the hearings, junta representatives dismissed the allegations as “unsubstantiated” and based on “non-objective” reports, while state media portrays the military as the country’s legitimate authority.
Legal experts note that a final judgment could come as early as 2026, but warn that the junta lacks effective control over large parts of the country and may be unwilling, or even unable, to implement any ruling. This reality highlights the practical limits of international justice when the very notion of state responsibility is eroding.
Whether The Hague can deliver meaningful accountability amid Myanmar’s political collapse remains uncertain. What is clear is that the pursuit of justice now unfolds against a country where authority is fragmented, violence persists, and the gap between legal principle and lived reality continues to widen.
Mozart is a research assistant at Mosaic Myanmar and is currently pursuing a Bachelor of Arts in Liberal Arts and Sciences at Parami University. His academic and professional interests span community development, minority issues, and social impact research. He has held roles including service-learning intern, student mentor, and operations coordinator for local initiatives, supporting project management, monitoring and evaluation, and education programs in Myanmar.
Editorial Deadline 23/01/2026 11:59 PM (UTC +8)
Solid reporting on the Mekong governance gaps. The Laos air pollution example nails a bigger pattern playing out globally rn, where policy frameworks exist on paper but enforcement infrastructure lags years behind. I saw the same thing with carbon credit verification in emerging markets, lots of regulatory theater without the institutional muscle to back it up. Cambodia's move deferring capital gains tax while rushing share transfer rules could create similr compliance headaches without proper tax authority capacity.