The Chinese-backed Funan Techo Canal is a 180 km waterway that will link the Mekong River to Cambodia’s Kep province on its south coast, connecting the capital of Phnom Penh to the sea. Once completed at an estimated cost of US$ 1.7 billion, it will enable Cambodia to export directly to world markets, reducing reliance on the Vietnamese ports that currently transport one-third of Cambodia’s shipments.
The Cambodian government worked closely with the China Road and Bridge Corporation (CRBC) to conduct the feasibility study and secure funding for the project. Former Cambodian Prime Minister Hun Sen played a significant role in advocating it and drumming up support from China. China’s involvement is part of its broader strategy to expand its influence in Southeast Asia through infrastructure investments, and the canal is seen as a key component of its Belt and Road Initiative.
Today, China is Cambodia’s largest investor, trading partner, and donor. In contrast, the U.S. government and its allies have imposed sanctions and cut funding over perceived human rights violations, driving Phnom Penh further into Beijing’s arms.
The Funan Techo Canal has made significant progress since the ground-breaking ceremony on Aug. 5 last year. The first section of the boundary posting process, spanning 21 km from Prek Takeo to Prek Po, was fully completed by Dec. 21, and by mid-December, 55 percent of the land demarcation for Phase 1 was also completed.
The ground-breaking ceremony coincided with Hun Sen’s birthday, and every TV station, public or private, was “requested” to broadcast the ceremony. Ambitiously, completion is scheduled for 2028.
But despite the robust demonstrations of state support, it has not been smooth sailing. Cambodia’s eastern neighbor and fellow ASEAN member Vietnam has repeatedly voiced concerns over water security and the likely impact on its “rice bowl” Mekong Delta region.
The project could still stall. In Myanmar, China funded a project known as the Myintsone Dam in 2011. The $3.6 billion dam, ranked as one of the biggest hydropower projects in the region, was controversial as it was expected to harm the environment and the Irrawaddy River. Its suspension caused shock and anger at Beijing’s State Power Investment Corporation, the main investor in the dam, and China is now trying to revive it.
The U.S. and Vietnam are also alarmed by the possibility that the canal could be used for military access. This parallels fears related to China’s funding and involvement in upgrading Cambodia’s Ream Naval Base in the southwestern province of Sihanoukville, which is being executed by the China Metallurgical Group. The upgrade includes new facilities and military equipment, such as the “gift” of two warships to Cambodia in September 2024. Analysts say the overhaul of the base on the Gulf of Thailand would benefit Beijing more than Cambodia, which lacks the military means to fully utilize the facilities.
The Funan Techo Canal project, too, has raised questions over whether Beijing would take advantage of the canal to amplify its clout with Cambodia and even to expand its military presence in Southeast Asia.
Infrastructure like the canal could divert significant trade from Vietnam to the Gulf of Thailand, increasing China’s leverage against countries with whom it has territorial disputes in the region. This shift could benefit other ports nearby, such as Thailand’s Laem Chabang Port. China has previously helped with the expansion of Laem Chabang, and China Harbor Engineering recently won the contract for Phase 3 of its development. The Thai Ministry of Transport estimates that increased freight traffic to Laem Chabang and the Gulf of Thailand from the Funan Techo Canal would also boost demand for the Thai Land Bridge project (formerly known as the Kra Canal project), a proposed rail and road transport corridor also backed by China.
But there is some financial speculation around the Funan Techo Canal project. Reuters reported that Beijing has expressed misgivings and held off from definitive commitment to its funding. A lack of economic viability coupled with abundant geopolitical risks—including concerns from countries such as Vietnam—may explain this hesitation. Brian Eyler of the Stimson Center’s Southeast Asia Program in Washington says: “Investors are not signing up to finance the canal due to its low economic viability and long list of unknown costs related to the long-term maintenance and environmental impact.”
Beijing may also be downsizing its overseas investments as its domestic economy struggles, even in countries it considers strategic partners like Cambodia. But Cambodia’s Ministry of Public Works and Transport has dismissed such reports.
The regional politics of any intervention in the flow of the Mekong are deeply vexed. In its mandatory submission to the Mekong River Commission, Cambodia chose, to the chagrin of its neighbors, not to seek a prior consultation, claiming that the canal does not constitute a diversion of the river system. Instead, it only sent a notification, which requires a much lower level of detail and clarity, leaving the project even more exposed to claims of environmental and social degradation.
Yet it does not seem like China is giving up on the project. Recent developments indicate that it is progressing as planned, Chinese officials have reaffirmed their commitment, and Cambodia’s deputy prime minister has dismissed claims of delays.
Vaishali Basu Sharma is an analyst on geopolitocal and macroeconomic issues
