In a significant development for Cambodia's trade infrastructure, the Cambodian government, in collaboration with China, has officially signed a monumental $1.2 billion deal to finance the Funan Techo Canal. This ambitious project aims to enhance trade efficiency by establishing a direct link between a branch of the Mekong River near the capital city of Phnom Penh and a strategically located port on the Gulf of Thailand. The announcement was made public on Friday by the governmental agency overseeing the project.

The agreement was signed during a state visit by Chinese President Xi Jinping, who concluded a three-nation Southeast Asian tour that also included stops in Vietnam and Malaysia. This visit underscores the strengthening ties between Cambodia and China, especially in infrastructure development.

Construction of the canal, which stretches an impressive 151.6 kilometers (approximately 94 miles), began last year but was temporarily halted shortly after its groundbreaking ceremony on August 5. The reasons behind this pause remain unclear, but Prime Minister Hun Manet has expressed unwavering commitment to the project, stating it will proceed no matter what the cost. He emphasized that this canal is not just an infrastructure project; it symbolizes national prestige, the territorial integrity, and the development of Cambodia.

The deal is structured as a public-private partnership, highlighting a collaborative approach to development. It was signed by Deputy Prime Minister Sun Chanthol on behalf of Cambodia, and Ieng Sunly of the Funan Techo Coastal-Inland Waterways Company Ltd., which is the private partner in this venture. Notably, Cambodian investors will maintain a 51% stake while their Chinese counterparts will hold 49%, ensuring a significant local investment in the project.

The official announcement on Friday elaborated on the capabilities of the canal, stating that it will create a new inland waterway-maritime corridor capable of accommodating vessels weighing up to 3,000 deadweight tons. The project will involve extensive canal excavation as well as the construction of essential infrastructure, including ship locks, navigation aids, and logistics facilities.

As an inland waterway and critical transport infrastructure for Cambodia, the Funan Techo Canal Project is set to emerge as a key engine driving national economic growth, remarked Wang Tongzhou, chairman of the China Communications Construction Company, during the announcement. He further added that upon completion, the canal will significantly cut comprehensive logistics costs in Cambodia and elevate the nations industries to a middle-to-high end of the value chain.

China Communications Construction Company, which is the parent organization of China Road and Bridge Corporation, has been awarded the contract for the construction, extending from the Bassac River to the coastal province of Kep. However, this massive state-owned enterprise has faced scrutiny and criticism due to alleged involvement in various financial scandals. It is also blacklisted by the United States owing to its role in supporting the Chinese military in the construction and militarization of artificial islands in the contentious South China Sea.

One of the promising aspects of the canal project is its potential to generate significant employment opportunities. According to the announcement, the construction and operation of the canal are expected to create up to 50,000 direct and indirect jobs in Cambodia, providing a much-needed boost to the local economy.

Despite the optimism surrounding the canal's development, there are growing concerns among environmental activists and local communities regarding its impact on the Mekong River's natural ecosystem. Critics argue that the canal could disrupt the river's natural flood patterns, exacerbating issues such as drought and affecting the nutrient-rich silt that is vital for rice production in Vietnam's Mekong Delta. This region is essential for millions of people and is a major global exporter of rice.

In response to these environmental concerns, the Cambodian government has stated that a comprehensive Environmental Impact Assessment was conducted by a team of 48 specialists, confirming minimal environmental impact from the project. Furthermore, the government has indicated its commitment to minimizing resettlement by designing the canal route to avoid dense communities and culturally significant sites, alongside implementing a responsible compensation and consultation process.