Cambodia and China conclude historic $1.156 billion agreement for the Funan Techo Canal

Cambodia and China have signed a historic agreement to advance the construction of the Funan Techo Canal, a transformative infrastructure project valued at US$1.156 billion.

The signing ceremony, held in Phnom Penh, marks a pivotal moment in Cambodia's commitment to modernising its economy and strengthening regional connectivity, thanks to China's investment and technical expertise.

An ambitious project that will redefine Cambodian logistics

The Funan Techo Canal, which will stretch approximately 151.6 to 180 kilometres from the Bassac River near Phnom Penh to the coastal province of Kep, is designed to accommodate ships with a maximum tonnage of 3,000 tonnes.

It will pass through four provinces — Kandal, Takeo, Kampot and Kep — and is expected to significantly improve Cambodia's land and sea transport capabilities. Construction officially began on 5 August 2024 and is expected to be completed within an estimated four years.

The main features of the project are:

• Excavation of the canal and rehabilitation of the river

• Construction of locks and hydrological stations

• Bank protection dams and slipways

• Navigation and logistics support infrastructure

Strategic partnership and investment structure

The agreement was signed by Cambodian Deputy Prime Minister Sun Chanthol and Wang Tong Zhou, President of China Communications Construction Company (CCCC), as part of a public-private partnership. Five key agreements were concluded, covering investment, engineering, construction, operation and maintenance, as well as agreements between the shareholders, namely the Royal Government of Cambodia and Funantech Coastal-Inland Waterway Co.

Chinese investors will finance 49% of the total project cost, with the remainder coming from Cambodian sources, demonstrating the deepening economic partnership between the two countries.

Economic and strategic importance

The Funan Techo Canal is expected to:

• Modernise Cambodia's river transport system and logistics sector

• Boost economic growth and job creation, with projections of up to 1.6 million jobs created during the construction and operation phases

• Reduce Cambodia's dependence on Vietnam-controlled Mekong trade routes by up to 70%, thereby strengthening the country's economic independence and strategic autonomy

• Improve water resource management, support agricultural expansion and strengthen resilience to climate change

At the signing, Deputy Prime Minister Sun Chanthol highlighted the dual role of the canal as both a technical feat and a strategic catalyst for trade, agriculture and national logistics. ‘This is the modern rebirth of a historic route, a powerful link between Cambodia's past and future,’ he said.

Expanded bilateral cooperation

The canal agreement is part of a broader package of 37 cooperation agreements signed between Cambodia and China, covering investment, trade, tourism and infrastructure. China has reaffirmed its unwavering support for Cambodia's development ambitions, with a total investment of nearly US$36 billion in the country over the past 35 years.

Outlook

As construction progresses, Cambodian officials and stakeholders are optimistic that the Funan Techo Canal will be a lasting symbol of international cooperation and a catalyst for the country's long-term economic resilience and regional influence.