Market Data 
A Chinese-backed canal project aims to connect the Cambodian capital Phnom Penh on the Mekong river with the sea by 2028, removing the need to go via Vietnam.
The Funan-Techo canal will be financed, built, operated and owned by a Chinese state-owned firm at a cost of $1.7 billion. The Cambodian government has been conducting an intense propaganda campaign about the supposed merits of the project. But the official rationale is confused, incomplete and contradictory.
Cambodia has an existing deep-water port at Sihanoukville, which is not mentioned a single time in the studies purporting to show the economic advantages of the Funan-Techo canal. The Sihanoukville port, built with French help in 1961, is a vital conduit for Cambodia’s international trade. The port today is badly managed, with its administration undermined by corruption, to the detriment of its competitiveness against ports in neighbouring countries.
The railway line which was also built with French help in the 1960s was designed to reinforce the port’s role. But the line has now been virtually abandoned in terms of international trade. This is a result of long-term negligence and incompetence on the part of Cambodia’s former prime minister Hun Sen, who, after ruling the country as a dictator since the 1980s, handed over official power to his son Hun Manet in 2023.
Calculations as to the future profitability of the Funan-Techo canal are not credible. They are undermined by the fact that they deliberately ignore the possibilities provided by the port of Sihanoukville, if it was better managed in conjunction with a functioning railway line. Taking account of these possibilities would allow a more realistic assessment. It’s inconceivable that the canal can play a role in Cambodia’s international maritime trade without relying on the country’s only deep-water port at Sihanoukville.
Geopolitical changes
Lack of transparency and public accountability are consistent features of the Cambodian regime’s policies across the board. It’s clear, however, that the real reasons for the canal project are not economic. Hun Sen’s vanity is insatiable. “Techo” is a distinctive honorific title which he uses and which he has decided to attach to the project, perhaps in a late bid to prevent history from judging him as a Khmer Rouge defector turned puppet Cambodian leader installed by Vietnam forty years ago.
This, he hopes, will be achieved by ensuring that Phnom Penh’s small river port no longer has to rely on Vietnam, which controls the downstream ports on the River Mekong near the South China Sea.
This question of commercial independence from Vietnam didn’t have much importance until recently because the Phnom Penh river port, since the construction of the maritime port at Sihanoukville, served mainly to support trade between Cambodia and Vietnam. The idea of reducing dependence on Vietnam is a new preoccupation for Hun Sen. This new priority reflects geopolitical changes which have recently seen Cambodia pass into the Chinese orbit.
These considerations mean that the canal, from Hun Sen’s perspective, has to be built at all costs. The canal is strategically important for China, and Beijing will deal with all aspects of the project, including feasibility studies, financing and day to day management for 50 years.
A strategic canal for China
The map above shows the strategic character of the canal for Beijing. The project will give China access to the Gulf of Thailand from southern China passing via Laos and Cambodia, but avoiding Vietnam. Almost all of the Mekong, from Tibet to the Gulf of Thailand, will be a strategic river under Chinese control.
The waterway will allow the transportation of goods, including weapons and ammunition, from China to the Gulf of Thailand. The canal will reach the sea close to the Chinese military base at Ream, which is also on Cambodian territory.
Use of the canal for international trade, however, will be complicated by the fact that Hun Sen initially came to power in Cambodia as a puppet of Vietnam. The Phu Quoc island and the surrounding waters facing the planned canal belong to Vietnam, following a sea border treaty with Vietnam signed by Hun Sen in 1982. This means that Vietnam will be in a position to block any passage from Cambodia’s territorial waters facing the canal to international waters. The transportation of arms and ammunition by China to its base at Ream won’t be affected by this problem as the base and the canal are both inside Cambodia.
Vietnam has already raised concerns that the project will lead to waterflow being diverted away from its stretch of the Mekong. Research from a state-backed Vietnamese institute, the Oriental Research Development Institute (ORDI), has rejected the Cambodian claim that the canal has purely socio-economic purposes and argues that regional security will be affected.
To reach the Gulf of Thailand Chinese military vessels currently have to sail at sea and are perhaps too visible for Beijing’s liking. The ORDI says that the locks on the canal can be used to create sufficient water depths for military vessels to enter the canal either from the Gulf of Thailand, or from the Ream naval base. The one certainty is that the canal, in combination with the Ream facility, will lead to greater political tensions and heightened instability for the whole region.
The views and opinions expressed in this article are those of the author.
Sam Rainsy, Cambodia’s finance minister from 1993 to 1994, is the co-founder and acting leader of the opposition Cambodia National Rescue Party (CNRP).
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