Bangkok - A Thai labourer allegedly killed a Cambodian co-worker with an axe early Friday after a heated and inebriated argument over the two countries' deteriorating diplomatic relations, police said.

Thai national Sinchai Namnon, 44, was the chief suspect in the slaying of Cambodian national Dieng, 40, who died shortly after midnight from a gash in the head and a nearly severed arm. Both injuries were inflicted with an axe.

The two men were employees at the Srimaharacha rubber processing company in Sri Racha, Chonburi province, 60 kilometres south-east of Bangkok.

"They were drinking together and got in an argument about the Thai engineer who was arrested on spying charges in Cambodia last week," Police Lieutenant Colonel Praphan Wangkanom said.

Sinchai had fled the scene by the time police arrived.

"We are still investigating whether there were others involved in the attack," Praphan told the German Press Agency dpa.

Thai engineer Sivarak Chutipong, an employee of the Cambodian Air Traffic Service (CATS), was arrested in in Phnom Penh on November 11.

The Cambodian government has accused Sivarak of passing on confidential information to the Thai embassy about the arrival of fugitive former Thai Prime Minister Thaksin Shinawatra on November 10.

Sivarak's arrest was part of an escalating spat between the two neighbouring countries, triggered by Cambodian Prime Minister Hun Sen's decision to name Thaksin his personal adviser.

Thaksin, who was toppled in a 2006 coup, faces a two-year jail term in Thailand on an abuse-of-power charge and is the main political antagonist of the current Thai government.

Thailand recalled its ambassador from Phnom Penh following the official announcement of Thaksin's appointment and called for a review of all aid and economic agreements with Cambodia.

Cambodia also recalled its ambassador and expelled Thailand's second secretary on charges of recruiting Sivarak.

The spat is likely to harm both countries' economies.

Cambodia is a major market for Thai exports, while Thailand is a major source of employment for Cambodian labourers.

According to a report released Friday by the International Organization for Migration, some 148,420 Cambodians had obtained permission for "temporary stay" in Thailand as labourers as of early September.

Another 6,130 Cambodians have been granted work permits, allowing them to work in the country year round.

Cambodians account for about 10 per cent of the one million-plus migrants working legally in Thailand. Thousands more work illegally in the kingdom. (dpa)