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Q&A: How Cambodia’s Chinese-backed Funan Techo Canal Risks Destabilizing the Lower Mekong Delta

File image of a Vietnamese farmer in the lower Mekong Delta, a region that could be adversely impacted if a $1.7 billion Chinese-backed canal is built in Cambodia. Nhac NGUYEN / AFP

In May 2023, the former prime minister of Cambodia – Hun Sen – led a cabinet meeting that gave the green light to the “Funan Techo Canal”, the first waterway system in Cambodia, which will connect Phnom Penh Autonomous Port to Kep Province of Cambodia.

The canal is 180 kilometers long, stretching from Prek Takeo of the Mekong River to Prek Ta Ek and Prek Ta Hing of the Bassac River, and connects to Kep province. The project will cut through four provinces in Cambodia including Kandal, Takeo, Kampot, and Kep province of Cambodia.

Map of the proposed Funan Techo Canal in Cambodia. Source: Cambodia National Mekong Committee

The plan is to build a waterway that is 100 meters wide, with a navigation depth of 4.7 meters. The project also includes the construction of three water gate systems, eleven bridges, and 208-kilometer sidewalks, which will be constructed by China Bridge and Road Corporation (CRBC) using the Build-Operate-Transfer model.

Current Cambodian prime minister Hun Manet strongly supports the project, promising that it won’t produce harmful environmental impacts, particularly on the Mekong River – a river shared by several ASEAN countries. In December last year, Hun flew to Vietnam to assure his Vietnamese counterparts that the project would not affect the water flow in the country’s part of the Mekong River. 

But some say it just may, and as a result, will undermine the 1995 Mekong Agreement – an agreement signed by Cambodia, Vietnam, Thailand, and Laos who promised to cooperate together in managing the river.

I spoke with Brian Eyler, a Stimson Center director, to understand more about China’s BOT development model and what it means for Cambodia, as well as the potential environmental implications of the project. Our conversation has been lightly edited for clarity.

SOK BOPHEA: Prime Minister Hun Manet has stated that Cambodia would not take a loan from China. However, one of the four giant China’s state-owned contractors, CRBC, will be involved via the BOT model. Can you briefly explain what this means?

I would assume that the BOT contract will go to a Chinese contractor for the ownership of the canal. That firm will take on the risk and finance the project. Under this arrangement, the Cambodian government does not take a debt. However, the income generated from the canal – whether from tolls or taxes, or other forms of income – will go to the owner of the project, which is likely to be that Chinese contractor, for a period of time of around 20 or 30 years depending on how the contract is negotiated. Only when the BOT contract expires, the ownership and income generated by the canal from that point onward will go to the Cambodian government. 

Also, the services that are required to transfer cargo from river barges to the ocean-bound shipping at the new port at Kep, will likely be provided by Chinese companies, who are already very active on developing Cambodia’s coastline. Port development contracts will have some kind of bidding process, but I’m willing to bet Chinese companies will receive the lion’s share of contracts.  

File image of Cambodian Prime Minister Hun Manet, Deputy Prime Minister Sun Chanthol and a representative of the China Road and Bridge Corporation at a signing ceremony for the feasibility study of the Funan Techo Canal on October 17, 2023 in Beijing. Image via Fresh News.

As such, the income from the services generated won’t go to Cambodians, it will go to Chinese-owned businesses. This makes me question whether the project benefits Cambodia more or whether it benefits China’s Belt and Road Initiative and Chinese construction companies’ interests more.

SOK BOPHEA: The Cambodian government assured Vietnam that the canal would not produce any harmful effects in their territories. Is that an honest promise? 

BRIAN: Prime Minister Hun Manet doesn’t need to play water diplomat to ease Vietnam’s anxiety. Cambodia is a signatory member of the 1995 Mekong Agreement and as such should adhere to the treaty. If the agreement is followed, then the Mekong River Commission (MRC) can manage the transboundary issues.

To be clear, Cambodia did notify the MRC in August 2023, but it made an error by labeling the canal as a tributary project instead of a mainstream one. By definition, the canal is a mainstream Mekong project because it impacts two channels of the Mekong mainstream: the Mekong mainstream itself and the Bassac channel.

This error could lead to MRC not being involved in assessing the transboundary impacts of the canal, holding public forums across the region, and collecting feedback. If the MRC could do its job properly, then the canal’s environmental and social impact assessment would be made publicly available. The MRC’s review would also provide guidance on how to mitigate those impacts.

In my opinion, this canal will have profound environmental transboundary impacts, not only on Cambodia but also across the border to Vietnam. A full technical review conducted by the MRC is necessary and it will create a better project in the end and with fewer impacts.

SOK BOPHEA: The canal’s long stretch will connect Phnom Penh Autonomous Port and Sihanoukville Autonomous Port, which will cut through Kandal, Takeo, and Kampot provinces. What are the major impacts already on your radar from this project?

BRIAN:  Looking at blueprints, if its lock and watergate system is well managed and well maintained, then the canal should not take water from the Mekong mainstream. Yet, my major concern is how the canal will cut across Kandal, Takeo, and Kampot provinces and how it bisects a huge transboundary floodplain between Kandal and Takeo which also runs deep into Vietnam’s Mekong Delta. This currently-connected floodplain creates conditions for impressive zones of agriculture production (some of Cambodia’s best rice comes from there) and fisheries and creates habitats for endangered species.

I think the best course of action is to explore alternative options for the projects, such as existing highways and railways to Sihanoukville Autonomous Port. But if the canal must be built, then most importantly, the impact on floodplain processes needs to be mitigated.

Brian Eyler, director of the Southeast Asia Program and the Energy, Water, and Sustainability Program at Stimson Center

The canal will disconnect the floodplain, stopping the flow of water downstream. The canal will create a dry zone to its south, including parts of Vietnam’s An Giang and Kien Giang provinces, and it will create a wetter zone to its north. When the water hits the canal during the wet season, it likely will exacerbate flooding in Takeo City and possibly even suburban areas in the south parts of Phnom Penh. The canal will change the natural flow of the floodplain, which already provides economic and social benefits to hundreds of thousands of people in Cambodia and millions of people in Vietnam. 

So, I am most worried about the floodplain impact and the unintended consequences that the canal will have. There might be a way to relocate it, or redesign the canal’s mitigation processes, and this is what the MRC could try to determine. If the MRC were involved in producing a better end product, then this could reduce much of the anxiety that is currently coming out of Vietnam.

SOK BOPHEA: If you can briefly summarize, what do you think the Cambodian government should do to safeguard and minimize those impacts you just mentioned?

BRIAN: I think the best course of action is to explore alternative options of the projects, such as existing highways and railways to Sihanoukville Autonomous Port.

But if the canal must be built, then most importantly the impact to floodplain processes needs to be mitigated. A possible solution is to move the canal farther north, so that the canal does not cut across the floodplain in Kandal and Takeo province and instead cuts across a traditionally dry area. 

The MRC is the best entity to help the Cambodian government to explore those options that can avoid or mitigate the greatest negative impacts wrought by the canal. 

Brian Eyler is the director of the Southeast Asia Program and the Energy, Water, and Sustainability Program at Stimson Center. He is the author of The Last Days of the Mighty Mekong, an expert on transboundary issues in the Mekong region, and specializes in China’s economic cooperation with Southeast Asia.

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