The Cambodia Funan Techo Canal Project was announced in 2023 after 26 months of feasibility studies. On August 5, 2024, the construction groundbreaking was held with a ceremony attended by 10,000 people across the country. Cambodian Prime Minister Hun Manet stated that the project will be completed in 4-5 years.[1] One of Cambodia’s biggest projects, the canal is seen by the government as a matter of national pride.
The canal is composed of three sections with a length of 180 kilometers. The first section (20 km) connects the Main Mekong River to the Bassac River; the second section (30 km) follows the natural course of the Bassac River; and the third section (130 km) connects the Bassac River to the Gulf of Thailand through the port of Kep. The project thus passes through four provinces in total; Kandal, Takeo, Kampot and Kep.
The Funan Techo Channel will be approximately 100 meters wide at the top and 80 meters wide at the bottom, 5.4 meters deep. It is designed to safely travel in opposite directions and accommodate vessels with a deadweight tonnage of up to 3,000 tons and has two lanes. The project will initially include 3 dams/weirs, 11 bridges and 208 kilometers of pavement, as well as navigation aids and other necessary infrastructure.
The Canal Project is designed to accommodate cargo vessels of up to 3,000 tons in Cambodia’s dry season and up to 5,000 tons in the wet season. The project is estimated to cost approximately USD 1.7 billion. It will be financed by the China Road and Bridge Corporation under a 50-year Build-Operate-Transfer model. In June 2024, Prime Minister Hun Manet announced that Cambodian investors would own 51% of the shares.[2]
With this project, the Cambodian Government aims to reduce dependence on Vietnamese trade routes, potentially reducing transportation costs by 70% and generating significant revenue from tolls. By reducing existing transportation time, distance and costs, it is anticipated to generate significant job creation, construction and economic development at the Sihanoukville Autonomous Port, Phnom Penh Autonomous Port and other ports and in the vicinity of this project.This project will serve as a flagship to promote sustainable urban development and support the country’s real estate growth and development.
Sun Chanthol, First Vice President of the Development Council of Cambodia and Deputy Prime Minister, stated in April 2024 that the canal is expected to generate $88 million annually in the first year and $570 million annually by 2050, create around 1.6 million jobs, and increase agricultural productivity through better management of water resources. These economic returns are based on the economic internal rate of return. Chanthol noted that the Ministry of Economy and Finance or the World Bank only funds projects if the economic internal rate of return calculation is at least 12%, but for the Techo Funal Canal, the estimate is 30%.
As the construction will cover a large section of the waterways, the government expects additional benefits such as the establishment of trade zones and logistics centers, the development of new satellite cities, and the expansion of development zones for agriculture, irrigation, aquaculture and livestock. Around 1.6 million people live on both sides of the planned canal and will be affected by its construction. The government has announced that “fair compensation” and resettlement schemes will be put in place for these people, similar to the approach previously used to build the Phnom Penh-Sihanoukville Highway.[3]
Some of the concerns raised by the Funan Techo Canal can be analyzed under different headings namely environmental, economic and regional.
On environmental concerns, it is argued that Cambodia is attempting to redefine the Bassac River as a tributary of the Mekong, ignoring the procedures of the 1995 Mekong Agreement. This, according to some American scholars, raises concerns that other countries in the region may similarly utilize parts of the Mekong for their own interests. It has also been argued that the Cambodian and Vietnamese authorities’ environmental discussions are inadequate and that the project could lead to flooding and land degradation, impoverishing many people. Another environmental concern relates to the feasibility of the project. There are concerns about whether the canal will be able to provide the amount of water needed to irrigate the surrounding area. The Cambodian National Mekong Committee claims that the canal project will provide enough Mekong River water for irrigation along the canal. However, countering this argument, a researcher in Vietnam has calculated that the amount of rainfall required for irrigation is ten times the amount received during the rainy season.[4] It is argued that this will have a negative impact on Vietnam’s agricultural industry.
Another point is that the canal is projected to have more downsides than economic benefits. Cambodia’s Deputy Prime Minister Sun Chanthol estimates that revenue from canal tolls will be $88 million in the first year and $570 million per year in current dollars after 25 years. Such estimates imply a compound annual growth rate of 8.1% over 25 years. This is also considered unlikely. In fact, other studies by other institutions project a CAGR of 3.95% for Cambodia over 25 years.[5]
One of the economic concerns is that the canal will not provide as much economic convenience as expected. According to this view: More than 30% by volume of maritime cargo to or from Phnom Penh is currently transshipped at the Vietnamese ports of Cai Mep or Cat Lai near Ho Chi Minh City. Cambodia’s Deputy Prime Minister Sun Chanthol argued that the use of the Funan Techo Canal would save $181 per TEU (general cargo capacity unit) of cargo transported to Kampot Port. On the current Vietnam route, this cost is $145/TEU. An economic assessment shows that ships using the Canal’s route would pay $550/TEU in the first year and $1,518/TEU in the 25th year, while those using the Vietnam route would pay $145/TEU and $468/TEU respectively over the same periods.[6]
There is also a view that opening a different trade route that is not connected to a Vietnamese port will not free Cambodia from its trade dependence on Vietnam. Unlike its neighboring countries, Cambodia is said to be stuck in low value-added products such as garments, agriculture in some areas and tourism, and will therefore have to integrate more and more into Vietnam’s supply chain.[7]
As can be seen, a significant part of the concerns are voiced by Vietnam. Behind this lies Vietnam’s concern that the canal’s impact on the environment could harm its agricultural economy and that it would lose out on trade.[8] Nevertheless, Vietnam has so far not openly criticized the project. Depending on the progress of the process, we may see that the concerns will subside or that they will deepen and relations between the countries in the region, especially between Cambodia and Vietnam, will change.
[1] “Funan Techo Canal launched – can it deliver on the hype?”, Khmer Times, https://www.khmertimeskh.com/501535596/funan-techo-canal-launched-can-it-deliver-on-the-hype/, (Erişim Tarihi: 13.10.2024).
[2] Ibid.
[3] Ibid.
[4] “Cambodia’s Funan Techo Canal project: A catalog of worries (analysis)”, Mongabay, https://news.mongabay.com/2024/07/cambodias-funan-techo-canal-project-a-catalog-of-worries-analysis/, (Erişim Tarihi: 13.10.2024).
[5] Ibid.
[6] Ibid.
[7] “The Funan Techo Canal Won’t End Cambodia’s Dependency on Vietnam”, Radio Free Asia, https://www.rfa.org/english/commentaries/cambodia-vietnam-canal-05042024101041.html, (Erişim Tarihi: 13.10.2024).
[8] “Why Cambodia’s Funan Techo Canal Project is Worrying Vietnam”, Vietnam Briefing, https://www.vietnam-briefing.com/news/why-cambodias-funan-techo-canal-project-is-worrying-vietnam.html/, (Erişim Tarihi: 13.10.2024).
