PHNOM PENH, Cambodia (AP) In a significant move aimed at bolstering trade efficiency and enhancing connectivity, Cambodia and China have officially signed a monumental $1.2 billion agreement to finance the construction of the Funan Techo Canal. This ambitious infrastructure project endeavors to link a branch of the Mekong River, situated near the Cambodian capital of Phnom Penh, directly to a strategic port on the Gulf of Thailand. The announcement was made by the government agency overseeing the initiative on Friday.

The formal agreement to support the Funan Techo Canal was finalized on Thursday during the state visit of Chinese President Xi Jinping to Cambodia. This visit was part of a broader tour encompassing three Southeast Asian nations, which included Vietnam and Malaysia. Following his engagements, Xi returned to China on Friday, having strengthened ties within the region.

Construction for the canal, which spans an impressive 151.6 kilometers (or 94 miles), commenced last year. However, work was suspended shortly after the groundbreaking ceremony held on August 5, 2022, with the reasons for this halt remaining unclear. Despite this setback, Cambodian Prime Minister Hun Manet emphasized the canal's significance, proclaiming that it would be built no matter what the cost. He portrayed the project as a pivotal step for enhancing national prestige, territorial integrity, and the overall development of Cambodia.

Characterized as a public-private partnership, the agreement was signed by Deputy Prime Minister Sun Chanthol on behalf of the Cambodian government, with Ieng Sunly representing the Funan Techo Coastal-Inland Waterways Company Ltd., the private entity involved in the project. Under this arrangement, Cambodian investors will hold a 51% stake while Chinese investors will maintain a 49% share.

According to the announcement made on Friday, the canal is poised to establish a new inland waterway-maritime corridor that will be capable of accommodating vessels with a deadweight tonnage of up to 3,000 tons. The project involves extensive excavation of the canal, alongside the development of essential navigation and logistics infrastructure, including the construction of ship locks.

Wang Tongzhou, chairman of China Communications Construction Company, remarked in the announcement that the Funan Techo Canal represents a critical step toward establishing a vital transport infrastructure in Cambodia. As an inland waterway, the FTC Project will become a new engine driving national economic growth, he stated. He further highlighted that upon completion, the canal is expected to notably lower comprehensive logistics costs in Cambodia, thereby facilitating a shift of the countrys industry toward the middle-to-high end of the value chain.

China Communications Construction Company, the parent organization of the China Road and Bridge Corporation, has been tasked with executing the construction of the canal from the Bassac River to the coastal province of Kep. This large state-owned firm has faced its share of controversies, including scrutiny for its alleged involvement in various financial scandals. Furthermore, it is blacklisted by the United States due to its role in assisting the Chinese military in constructing and militarizing artificial islands in the contentious South China Sea.

Furthermore, the canal project is anticipated to generate up to 50,000 new jobs, both directly and indirectly, across Cambodia, providing a substantial boost to the local economy.

However, the initiative has not been without its critics. Concerns have been raised regarding the potential environmental impact of the canal, particularly its ability to disrupt the natural flood patterns of the Mekong River. Such disruptions could exacerbate drought conditions and diminish the nutrient-rich silt necessary for sustaining rice production in Vietnams Mekong Delta, a region crucial to feeding millions and a major player in global rice exports.

Despite these critiques, the announcement asserted that a comprehensive Environmental Impact Assessment, conducted by a team of 48 specialists, has determined that the canal will have minimal environmental impact. Additionally, the Cambodian government has taken steps to ensure that resettlement issues are addressed responsibly, with a planned route designed to avoid heavily populated areas and culturally significant sites. Plans for compensation and consultation processes are also currently in progress.