How Cambodia’s Funan Canal Could Redefine Southeast Asia

During Xi Jinping’s visit to Cambodia, the two countries signed a deal to build the Funan Techo Canal — a project symbolising China's rising influence, Cambodia's ambitions, and regional environmental risks.

Cambodia is a country with limited direct maritime access. It has long depended on Vietnamese ports, particularly the Cai Mep port, for much of its international trade. This dependence has led to logistical vulnerabilities and diplomatic frictions. The new canal aims to reduce that reliance by connecting the Bassac River, a tributary of the Mekong, directly to the Gulf of Thailand.

The project’s name, "Funan Techo Canal," is a nod to Cambodia's ancient Hindu kingdom of Funan, which was one of the earliest maritime trading empires in Southeast Asia. Symbolically, the canal signals a return to Cambodia's maritime heritage and asserts a forward-looking national ambition to reclaim economic independence and regional relevance.

Spanning 151.6 kilometres from Phnom Penh to Kep province, the canal is designed to accommodate ships of up to 3,000 deadweight tonnes. With a width of 100 metres and a depth of 5.4 metres, it will enable year-round navigation, bypassing Vietnam's control over Cambodian seaborne exports.

The canal is being built through a public-private partnership under a build-operate-transfer (BOT) model. Cambodian entities will hold a 51% stake, while Chinese investors will retain the remaining 49%. The total estimated cost is around $1.2 billion. Construction is expected to begin later this year, and it is estimated that over 50,000 direct and indirect jobs will be created throughout the canal’s development phase.

The project's stated goals are ambitious: reduce transport costs, stimulate industrial zones along the waterway, and promote internal connectivity within Cambodia’s provinces. For a country still recovering from the economic impacts of the COVID-19 pandemic, such infrastructure represents both an economic opportunity and a political statement.

China’s Expanding Footprint

China’s involvement in the Funan Techo Canal forms part of its broader Belt and Road Initiative (BRI) strategy to expand global influence through infrastructure investment. China has long been Cambodia’s largest investor and aid provider, funding everything from highways and hydropower plants to stadiums and surveillance systems.

The canal offers China several strategic advantages: economically, it strengthens its foothold in Southeast Asia’s logistics network; politically, it deepens ties with a reliable regional ally as the U.S. and partners step up engagement with ASEAN. Though presented as a commercial project, Chinese involvement in port infrastructure often evolves into dual-use arrangements, raising concerns over potential military applications.

Cambodia’s Calculus

From Cambodia’s perspective, the canal is a milestone. Prime Minister Hun Manet, who succeeded his father Hun Sen in 2023, has continued to champion close ties with China. The project offers his administration a major domestic win in terms of infrastructure, employment, and national pride.

Yet, not everyone within Cambodia is enthusiastic. Environmentalists and civil society groups have raised questions about the lack of transparency in planning, the absence of a comprehensive environmental impact assessment, and the long-term implications of increased Chinese control over critical assets. However, in a political landscape tightly controlled by the ruling Cambodian People’s Party, dissent remains muted.

Vietnam’s Growing Unease

If the canal strengthens Cambodia’s strategic autonomy, it will also challenge Vietnam’s regional influence. Vietnam is concerned about two main issues: ecological disruption and strategic balance.

First, the canal could alter the natural flood cycles and sediment flows of the Mekong River, further threatening Vietnam’s Mekong Delta, a vital agricultural region already suffering from upstream damming and climate change. Reduced silt deposits and increased salinity could devastate rice production and fisheries.

Second, the canal is viewed as part of a broader encroachment by China into Vietnam’s backyard. As Chinese-funded projects tighten their grip around Vietnam's western and southern flanks, strategic analysts in Hanoi worry about encirclement and increased vulnerability in the Mekong region.

The Environmental Equation

Beyond national rivalries, the canal raises urgent ecological concerns. The Mekong River is the lifeline of mainland Southeast Asia, supporting over 60 million people across six countries. Environmental experts warn that the canal could disrupt the river’s seasonal rhythms, exacerbate drought conditions, and threaten biodiversity in one of the world’s richest inland ecosystems.

Cambodia has not yet released a full environmental impact assessment, and regional cooperation mechanisms such as the Mekong River Commission have so far played only a marginal role in canal planning. With climate change already stressing the Mekong’s flow, further alterations could have cascading effects on food security, migration, and regional stability.

A Canal of Many Currents

The Funan Techo Canal symbolises shifting regional dynamics. For Cambodia, it offers hope for economic revival and strategic autonomy; for China, another link in its global influence network; and for Vietnam, a source of anxiety.

As construction begins, the project will test the region’s ability to balance ambition with ecological and geopolitical realities. Its impact will ripple across the Mekong Basin and resonate in regional diplomacy for years to come.

(The author is a foreign affairs expert. Views personal.)