Cambodia rulers pin reputation on contentious canal project

Fireworks marked the groundbreaking event on August 5 for a 180-kilometer (112-mile) canal that will be carved through Cambodia's eastern regions, a megaproject billed by the government as an economic necessity that will allow the country to "breathe."

The €1.5 billion ($1.64 billion) Funan Techo canal will link the Mekong River near the capital Phnom Penh to two new deep-water ports on the Gulf of Thailand.

"We must build this canal at all costs," said Cambodian Prime Minister Hun Manet at the groundbreaking ceremony, according to local media.

Phnom Penh reckons it can finish the project by 2028. However, there remains much doubt about whether the Cambodian government has even secured the necessary funding from China.

A risky project

Critics say the project makes little economic sense, while environmentalists assert diverting water away from the Mekong River might be particularly ruinous to neighboring Vietnam, especially its rice-producing heartlands that lie south of the canal's proposed route.

There have even been allegations, some of which were leaked by Vietnamese academics, that the canal could pose a security risk to Vietnam if Cambodia were to allow its "ironclad friend" China to use the waterway for naval reasons.

However, the project has become a "trademark" of the new administration of Hun Manet, who inherited his position from his father, Hun Sen, who had served as Cambodia's premier for almost four decades before stepping down last August.

Hun Sen still wields immense power as president of both the ruling party and the Senate. Last year, he announced the scheme just before he resigned as prime minister.

Economic and strategic implications

According to the government, the canal will not only make imports and exports cheaper, but will also end Cambodia's historic dependence on Vietnamese ports, through which a majority of Cambodian goods are still transported.

Earlier this year, Sun Chanthol, a deputy prime minister, claimed that the canal would cut shipping through Vietnamese ports by more than two-thirds and reduce shipping costs by as much as 30%.

This would be a boon for Cambodian exporters at a time when the country's goods face stiff competition from other low-cost manufacturing nations.

In recent years, Cambodia has built a deep-water port in Sihanoukville, a southwestern city on the Gulf of Thailand, and a new port will soon be opened in Kampot, south of the capital.

Uncertain future

But it is not certain when work will begin on the Funan Techo canal. Much comes down to the costs of building the canal. Initially, Phnom Penh indicated that it would be entirely funded by China as part of the Belt and Road Initiative (BRI), Beijing's global infrastructure scheme.

But interest from Chinese state-run firms has been lukewarm. According to the Cambodian government, the China Road and Bridge Corporation has signed up to partially fund and build the canal.

Hun Manet said on Monday that the first two installments for the canal's development, from Prek Takeo to Kep province, roughly 150 kilometers, will be financed mainly by Cambodian-owned companies, including the state-owned Sihanoukville Autonomous Port and Phnom Penh Autonomous Port.

Of the second section of the development, from Koh Thom to Kep province, the China Road and Bridge Corporation will control only a 49% stake in the controlling company, he added.

Many analysts reckon the estimated €1.5 billion price tag is way too low.

"There's a saying coming out of China: In China, a 100-kilometer canal costs $10 billion to build," Brian Eyler, director of the Stimson Center's Southeast Asia Program, told DW.

"So, if Chinese investors are eying this project, then they likely know the cost is widely underestimated and could be getting cold feet."

Added to this, China Road and Bridge Corporation is having difficulty making a profit from the tolls on the expressway it built that runs parallel to the canal, Eyler noted.

"I would assume [China Road and Bridge Corporation] would want to avoid building a new transportation artery that would compete away income from its new expressway."

There are also question marks over the economic viability of the canal itself.

The canal won't be able to accommodate larger vessels, so a significant percentage of Cambodia's imports and exports will still need to be transported via Vietnam's ports.

Environmental concerns

The environmental impact is far more critical. Numerous ecological groups have called on the Cambodian government to either halt the project or rethink how it will be built.

The Mekong River supports up to a quarter of the world's freshwater fish catch and half of Vietnam's rice production.

Hanoi has signaled its displeasure that Phnom Penh hasn't yet publicly released the environmental impact assessments over the megaproject.

Environmentalists worry that because the canal is being built across an active floodplain, it could leave areas north of the canal at even more risk of floods while creating dry zones south of the canal in Cambodia and Vietnam.

"We support a transparent and participatory process that would ensure socio-environmental due diligence on a project of this magnitude," an EU spokesperson told DW.

"We also encourage political dialogue at a regional level regarding its possible impact, and in particular the role of the Mekong River Commission as the appropriate platform for technical dialogue," the spokesperson added.

A 'legacy project'

Despite the criticism, the Cambodian government has been resolute that the project will go ahead. Analysts say that Hun Manet and his father have staked their reputation on the canal.

"Our ancestors built the Angkor Temple and other great monuments, but unfortunately, we used to be divided. Now, we are once again united, and we are building new achievements," Hun Manet said in May, according to local media.

Hun Sen has been particularly involved in the canal and has billed it as a "legacy project." The groundbreaking ceremony was held on Monday to coincide with his birthday.

"The government has invested significant political capital in this project, making it a crucial test of Manet's leadership," Sophal Ear, associate professor at the Thunderbird School of Global Management at Arizona State University, told DW.

"The success or failure of the canal will likely be seen as a reflection of his ability to deliver on ambitious infrastructure projects and navigate complex geopolitical landscapes," Eyler said, pointing out that it is a high-stakes endeavor that could define his legacy and influence Cambodia's regional standing for years to come.

Edited by: Shamil Shams