The Funan Techo Canal: Cambodia's bold gambit for the future
- Alessandro Mayoral
- Sep 29
- 6 min read
Updated: Oct 1
Cambodia’s Regional Shakeup
As tensions across the world rise with global and regional powers engaging in a continuous struggle for influence, Southeast Asia (SEA) has emerged as a central battleground for strategic competition and shifting geopolitical relations. Unsatisfied with the longstanding domination of regional heavyweights, Cambodia has embarked on a mission to disrupt regional dynamics and bring the humble kingdom to the region’s forefront with its latest $1.16bn mega project, the Funan Techo Canal. This generational project promises to catalyse economic development and fundamentally reshape maritime trade. However, Cambodia's flagship project has drawn international concern regarding its political impact and role in expanding Chinese economic and military interests in the Asia-Pacific region.
Cambodia’s Achilles Heel
Before we dive in, let’s first take a look at the Cambodian economy to better understand the underlying motivators behind the canal. Like many of its regional partners in the Association of Southeast Nations (ASEAN), Cambodia's economy has and continues to rely heavily on its vast international trading network as a key pillar for economic growth. The World Bank estimates that the country's exports account for as much as 60% of its GDP, with GFT and agricultural goods leading the way, amounting to 52.46% and 18.29% of total export earnings in 2024, respectively.
While Cambodian goods find their way across a diverse range of export markets, spanning the Americas, Asia and Europe, the United States of America takes the lion's share, with 39% of Cambodian exports. Its next largest export market, ASEAN, only accounts for 20%. This over-reliance on singular markets extends to imports, with the country relying on China for 47% of all its import needs. Despite international trade continuing to grow year-on-year for the kingdom, reaching $54.74 billion in 2024 – a 16.9% increase from 2023 – a lack of economic diversification hampers Phnom Penh’s strategic international standing and negotiating power.
Consequently, Cambodia remains highly vulnerable to external shocks and abrupt foreign policy shifts. Just look at the crippling "Liberation Day" tariffs imposed by American President Trump – the highest amongst all nations at 49% – which dealt Cambodia an economic deathblow by effectively cutting off its largest export market. Beyond these trade pressures, the region's geography further confines Cambodia, forcing it to depend on the Mekong Delta as the primary route for trade in and out of the country. As a result, as much as a third of Cambodia's international cargo traffic is transported downstream into Vietnamese ports, giving Vietnam considerable political and economic leverage in its bilateral relationship with Cambodia.
The Cambodian government is rapidly seeking avenues to diversify its economy through international trade to correct this imbalance. In doing so, it hopes the canal will lead efforts to achieve its long-term goal of becoming an Upper Middle-Income Country (UMIC) by 2030. The FTC has been earmarked to spearhead these efforts by providing direct access to maritime trade routes and giving the country a "nose to breathe through", all whilst reinforcing the country's self-proclaimed status as "Asia's most open and liberalised economy".
National pride or Trojan horse?
Expected to be completed in 2029, the FTC will connect Cambodia’s capital, Phnom Penh, to the Southern province of Kep, off the coast of the Gulf of Thailand - connecting the Mekong Delta to the Bassac River. Spanning 151.6km with a width of 100-metres and depth of 5.4m, the FTC will flow through the provinces of Kandal, Takeo, Kampot, and Kep, allowing ships of up to 3,000 deadweight tonnes (DWT) in the dry season to pass through, with increased capacity for ships up to 5,000 DWT from May to October during the wet season. While significantly smaller than the world-renowned Suez or Panama canals, the FTC hopes to emulate their pivotal contribution by providing a vital trade route for cargo ships in Southeast Asia.
However, scrutiny surrounding Chinese involvement in the project's funding has been rife, especially given its sizeable price tag relative to the national budget and designation as a Chinese Belt and Road initiative. However, unlike other BRI participating nations, Cambodia did not choose to fully finance the project through Chinese state-backed loans; instead, it opted for a hybrid financing strategy via a 51%-49% ownership split between domestic and Chinese-backed institutional investors. Under the $1.2bn deal signed in April, 51% of capital funding would come from Cambodian investors, with the Sihanoukville Autonomous Port and Phnom Penh Autonomous Port being majority owners, with the remaining 49% of funding coming from a ‘Build, Operate and Transfer’ model in partnership with the China Road and Bridge Corporation (CRBC).
Like many Belt and Road projects, the canal’s financial viability has also been called into question after critics judged the canal’s revised $1.16bn cost to be too low and its forecasted annual revenues starting at $88m and growing to $570m by 2050 to be overly optimistic. The government's lack of transparency has further fuelled uncertainty and scrutiny with its failure to publicly release economic modelling of the canal. Even if the ‘projected’ revenue could be used to fund new fiscal spending without imposing a crippling debt burden, Cambodia’s institutionalised corruption – ranking 158 out of 180 countries on the Global Corruption Index – renders these lofty ambitions speculation at best.
Economic Impacts
Having established what the Funan Techo canal is, why it’s being constructed and how, let’s dive into the meat and potatoes: what will it actually do for Cambodia? For one, the project itself is anticipated to create as many as 50,000 new jobs across a mix of low, medium and high skill labour, providing economic opportunities for all, regardless of educational or socioeconomic status. Local communities stand the most to gain through increased industrialisation, expanded tourism and commercial activity, providing opportunities to escape low-paying agricultural work to previously inaccessible higher-paying jobs in construction, manufacturing, transport and trade. Crucially, the canal route amplifies these impacts by running through 14,000 factories across industrial hubs in the south and being strategically located near 10% of the population.
Asia's New Flashpoint?
For Cambodia, the very idea of the canal has put it at odds with its southern neighbour, Vietnam, with political disputes having persisted since the project’s approval all the way back in 2023. A major sticking point for Hanoi is the loss of reliable shipping fees and political leverage, with Cambodia critically dependent on Vietnamese ports as a gateway for international trade; power explicitly exploited by Vietnam in its 1956 and 1994 economic blockade of Cambodia. To address this fundamental issue, Cambodian officials have set their target of reducing their reliance on Vietnamese ports by as much as 70% through a combination of reduced transportation costs amounting to 25%, enhanced logistical facilities and faster travel times. Nullifying Hanoi's political ace at the negotiating table and placing both countries on more equal footing.
National security has also been a hotly contested issue with Vietnamese reports, albeit state-backed, raising alarm bells that the canal could be used by the Chinese People's Liberation Navy (PLA) to extend its operations and influence near the Vietnamese border. While speculative in nature, these warnings have credible merit given Beijing’s growing appetite for using overseas civilian infrastructure projects to facilitate covert military deployments - just late last year ‘spy ship’ Yuan Wang 5 was spotted in the BRI port of Hambantota, Sri Lanka. Hanoi's concerns are further justified by the presence of China's only Asian military post, the Ream Naval base, on its doorstep, alongside historical Chinese aggression targeted towards asserting dominion over Vietnam's self-claimed EEZ in the South China Sea. However, despite this fear being shared with Thailand and, in particular, the United States, Article 53 of Cambodia’s constitution – prohibiting deployments of military forces within Cambodian lands – serves as a reminder not to overblow such grave warnings.
Whether the FTC proves to be a ticking geopolitical time bomb, or, as the reigning Hun dynasty believes, a project that will transform Cambodia's economy, or indeed a Chinese Trojan horse masquerading as a project for national unification, remains to be seen. What is clear, however, given the complex web of clashing regional interests and ambitions, with the Funan Techo Canal, a new geopolitical tide is rising in the Mekong subregion, poised to reshape the economic and security landscape of the wider Asia-Pacific.
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