Cambodia and China have signed a $1.2-billion financing agreement for a 150-kilometre canal that will link a branch of the Mekong River near Phnom Penh to a port on the Gulf of Thailand, ending months of uncertainty about the megaproject.
The Cambodian government announced the agreement on Friday in Phnom Penh, a day after a visit by Chinese President Xi Jinping that resulted in the signing of numerous deals.
The Funan Techo Canal agreement reflected the two countries’ desire to build “safe and stable supply chains … (and) strengthen cooperation in transport infrastructure”, said a joint statement released by China’s foreign ministry on Friday.
Cambodia is hoping that the canal will help transform its economic fortunes, though the investment and scale of the project have been apparently trimmed.
“China supports Cambodia in building the Funan Techo Integrated Water Conservancy Project in accordance with the principles of feasibility and sustainability,” the joint statement said.
The canal project was previously estimated to cost $1.7 billion, or nearly 4% of the country’s annual gross domestic product. Its planned length of 180km has been scaled back to 151.6km, the Cambodian government said in a separate statement.
The project will be financed through a public-private partnership, the statement said, with Cambodian investors holding a 51% stake and Chinese investors 49%. (Story continues below)
Chinese President Xi Jinping meets with Cambodian Prime Minister Hun Manet at the Peace Palace in Phnom Penh on April 17. (Photo: Agence Kampuchea Presse via Reuters)
Questions from investors
Construction of the canal began last year but was halted shortly after the Aug 5 groundbreaking ceremony for reasons that were not made clear. Reports later emerged that China was having second thoughts about the investment viability of the venture.
Prime Minister Hun Manet said at the time that the canal will be built “no matter what the cost”, emphasising that the project promotes “national prestige, the territorial integrity and the development of Cambodia”.
“The canal will create a new inland waterway-maritime corridor capable of handling vessels up to 3,000 deadweight tons,” according to Friday’s announcement. It will encompass canal excavation and the construction of ship locks, navigation and logistics infrastructure.
China Road and Bridge Corporation, a subsidiary of state-owned China Communications Construction Company, is the contractor for the project’s construction from the Bassac River to the coastal province of Kep.
According to Friday’s announcement, the canal is expected to create “up to 50,000 direct and indirect jobs in Cambodia”.
Critics have raised concerns that the canal could severely disrupt the natural flood patterns in the Mekong River. They say disruptions could lead to worsening droughts and a reduction in the nutrient-rich silt essential for rice production by Vietnam in the Mekong Delta.
An artist’s rendering shows a section of the planned Funan-Techo Canal in Cambodia. (Image from Facebook/Cambodia Ministry of Public Works and Transport video)