Cambodia and China have signed a public-private partnership contract and related agreements for a US$1.2 billion canal linking the Mekong River with the Gulf of Thailand, reducing Cambodia’s reliance on ports in Vietnam.

The signing took place in Phnom Penh on April 17 during Chinese President Xi Jinping’s state visit to Cambodia, the third and final leg of a five-day tour of Southeast Asia, which also included Vietnam and Malaysia.

Expected to take four years to complete, the Funan-Techo Canal project was launched with a groundbreaking ceremony in August last year.

Cambodian investors, including Overseas Cambodia Investment Corporation, Phnom Penh Autonomous Port, and Sihanoukville Autonomous Port, hold 51%. The Chinese partner is China Road and Bridge Corporation, a subsidiary of China Communications Construction Company ( CCCC ).

‘Modern revival of a historic route’

Cambodian Deputy Prime Minister Sun Chanthol – also first vice-chairman of the Council for the Development of Cambodia, the government investment agency – says the project is an “ambitious engineering undertaking”.

But the canal is “also a strategic enabler for transportation and connectivity, trade, agriculture, water management, climate-change resilience, tourism, and national logistics”, he says.

“It is a modern revival of a historic route – a powerful link between our Cambodian past and future.

“Let this canal serve as a lasting symbol of what can be achieved when nations cooperate in good faith, when vision is backed by action, and when the public and private sectors come together in the service of the people.”

Cutting logistics costs

Wang Tongzhou, the CCCC chairman who accompanied President Xi to Cambodia, describes the inland waterway as a “new engine driving national economic growth”.

“After completion, it will significantly reduce the comprehensive logistics costs in Cambodia and promote Cambodia’s industry to the middle-to-high end of the value chain,” Wang says.

In addition to creating up to 50,000 jobs, cutting logistics costs and shortening trade routes, the canal is expected to help boost agricultural productivity, expand irrigation, and improve access to international markets.

It is also expected to boost tourism and industrial development while shifting heavy transport away from roads and reinforcing Cambodia’s role as a logistics hub for members of the Regional Comprehensive Economic Partnership ( RCEP ).

Grouping all ten members of the Association of Southeast Asia ( Asean ) with China, South Korea and Japan along with Australia and New Zealand, RCEP is the world’s biggest free-trade agreement.

In a joint statement marking Xi’s visit to Cambodia, the two sides say they “agree to continue to give full play” to RCEP as well as the Cambodia-China Free-Trade Agreement and the Asean-China Free-Trade Area, which is scheduled to be upgraded this year.

At the same time, Cambodia expresses support for Hong Kong’s accession to RCEP.

“Both sides believe that trade and investment restrictions have an impact on economic security and the international trade, and firmly oppose trade protectionism,” the statement says, in an apparent reference to America’s unilateral tariffs against most trading partners announced this month.

As for the canal, which partly involves existing waterways, China supports Cambodia in developing the new waterway “under the principle of feasibility and sustainability”, the statement says.