The Funan Techo Canal: Cambodia’s Ambitious Inland Waterway Project

On April 17, 2025, the Cambodian government signed a public-private partnership agreement with the Funan Techo Coastal – Inland Waterways Company Ltd. to construct the Funan Techo Canal, the country’s flagship infrastructure project linking the capital with the Gulf of Thailand. The signing occurred during Chinese President Xi Jinping’s state visit to Cambodia.

It was witnessed by the Chairman of China Communications Construction Company (CCCC), the China Road and Bridge Corporation (CRBC) parent company, which will build the canal.

Infrastructure scope and economic goals

The canal will span approximately 180 kilometers in length, with a width of 100 meters upstream and 80 meters downstream. Its depth will be 5.4 meters, and it is designed to accommodate vessels of up to 3,000 deadweight tons. The project aims to boost Cambodia’s economic development by connecting Phnom Penh to the Gulf of Thailand and reducing dependence on Vietnam’s Cai Mep seaport. It is expected to enhance Cambodia’s industrial, agricultural, logistics, and real estate sectors by integrating inland waterways with international maritime trade routes.

Timeline and project financing

Initially announced in 2021, the project held its groundbreaking ceremony on August 5, 2024. CRBC signed the initial investment framework on October 17, 2023. Originally estimated at US$1.7 billion, the project has since been revised to US$1.16 billion, with China providing 49 percent of the funding. The full construction timeline is estimated at four years, with the project expected to be completed around 2029. On April 30, 2025, Cambodia’s Ministry of Public Works and Transport announced the completion of land demarcation and mapping for Phase 1, enabling construction to proceed to the next phase.

The full construction timeline is estimated at four years, with the project expected to be completed around 2029.

Anticipated economic and social impact

The canal is expected to:

• Create up to 50,000 direct and indirect jobs
• Reduce logistics costs and shorten trade routes
• Improve agricultural productivity and irrigation
• Enhance market access for farmers and industries
• Stimulate tourism and industrial zones along the route
• Shift freight from road to water, lowering maintenance costs
• Position Cambodia as a logistics hub within ASEAN and RCEP
• Promote sustainable and inclusive economic growth

Cambodia’s logistics costs currently stand at around 26 percent of GDP, one of the highest in the region, according to World Bank data from 2020. By improving inland connectivity, the canal is expected to lower these costs and facilitate more efficient trade.

Reducing dependence on Vietnam

One of Cambodia’s key strategic objectives is to reduce its heavy reliance on Vietnam for trade access. In 2024, Cambodia exported US$3.6 billion worth of goods to Vietnam — 13.6 percent of its total exports — primarily consisting of agricultural products. However, much of these exports are processed and re-exported by Vietnam, limiting Cambodia’s value capture and trade independence.

Further, Cambodian goods shipped from Phnom Penh must transit down the Mekong River to Vietnamese ports such as Ho Chi Minh City, taking 4–6 days and incurring high transit and port handling fees. The cost of shipping a 20-foot container ranges from US$670–700, while a 40-foot container costs around US$890–950.

The development of the Funan Techo Canal presents a significant opportunity to bypass Vietnamese ports altogether. This new, more direct route to the sea is expected to eliminate customs delays and intermediary fees, cutting shipping costs by an estimated 25 percent. As a result, the cost of shipping a 20-foot container could drop to US$500–530, and a 40-foot container to US$670–730, substantially enhancing Cambodia’s logistical efficiency and economic sovereignty.

China’s strategic role in the canal

China plays a central role in the development of the Funan Techo Canal, a flagship infrastructure project under the Belt and Road Initiative (BRI). In return for its investment, China is expected to receive exclusive operational rights to the canal for 40 to 50 years, including the authority to collect tolls and manage logistics. This arrangement reflects a broader strategy by China to strengthen regional connectivity and economic ties with Southeast Asia through long-term infrastructure partnerships.

Cambodia has become a significant BRI recipient, with Chinese funding heavily concentrated in large-scale transport and logistics projects. Alongside the canal, China has financed the US$2 billion Phnom Penh–Sihanoukville Expressway, drastically cutting travel time to Cambodia’s primary seaport. It also bankrolled the new Siem Reap Angkor International Airport (inaugurated in 2023) and is now upgrading Phnom Penh International Airport, transforming Cambodia’s aviation capacity.

China’s involvement extends to economic and industrial development zones that aim to attract investment and boost employment. The Sihanoukville Special Economic Zone (SSEZ), a joint Cambodian-Chinese venture, now hosts nearly 200 enterprises employing more than 30,000 workers. China has also supported the construction of over 3,200 kilometers of roads and eight major bridges, enhancing Cambodia’s domestic connectivity and facilitating trade routes tied to Chinese-led infrastructure.

Under the broader “Diamond Hexagon” cooperation framework, China’s engagement has diversified beyond transport. Investment flows have expanded into green energy, digital infrastructure, agriculture, and manufacturing. The “Fish and Rice Corridor,” for instance, showcases efforts to modernize Cambodia’s rural economy by leveraging Chinese technology and funding.

Many of these initiatives are structured through loans, Build-Operate-Transfer (BOT) agreements, and direct investments from Chinese state-owned and private enterprises, enabling Cambodia to pursue infrastructure development with a limited upfront fiscal burden.

While these developments have catalyzed Cambodia’s modernization, they also underscore the country’s growing economic dependence on China. With China holding long-term stakes in critical infrastructure, questions are emerging about Cambodia’s future policy autonomy and its ability to navigate strategic interests independently.

Environmental and resettlement concerns

Environmental and social concerns have accompanied the canal’s development. Experts warn it could alter Mekong River water flows, potentially affecting the Mekong Delta in Southern Vietnam and creating environmental imbalances. The canal may also affect the livelihoods of approximately 1.5 million Cambodians along its route. The Cambodian government has stated that a thorough environmental impact assessment has been conducted, and no national nature reserves have been found along the route. The alignment was reportedly designed to avoid dense communities and cultural sites to minimize resettlement.

Conclusion: Balancing opportunity and risk

The Funan Techo Canal represents both opportunity and controversy: a transformative infrastructure project with the potential to reshape Cambodia’s economic geography, but one that must carefully navigate environmental, social, and geopolitical sensitivities.

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