China and Cambodia ink deal for massive canal project that has raised environmental concerns

PHNOM PENH, Cambodia (AP) - Cambodia and China have signed a $1.2 billion deal to finance an ambitious canal project that aims to boost trade efficiency by linking a branch of the Mekong River near Phnom Penh to a port on the Gulf of Thailand, the Cambodian government agency heading the project announced Friday.

The deal to fund the Funan Techo Canal was signed Thursday during the state visit to Cambodia of Chinese President Xi Jinping, the agency said in a news release. Xi returned home Friday after a three-nation Southeast Asian tour that also included Vietnam and Malaysia.

Construction of the 151.6-kilometer (94-mile) canal began last year but was halted shortly after the Aug. 5 groundbreaking ceremony for reasons that were not made clear. Cambodian Prime Minister Hun Manet said at the time that the canal will be built "no matter what the cost," emphasizing that the project promotes "national prestige, the territorial integrity and the development of Cambodia."

Described as a public-private partnership contract, the deal was signed by Deputy Prime Minister Sun Chanthol on behalf of Cambodia's government, and by Ieng Sunly of the Funan Techo Coastal-Inland Waterways Company Ltd., the private sector partner. The project is being developed on a build-operate-transfer basis, with Cambodian investors holding a 51% stake, and Chinese investors holding 49%.

"The canal will create a new inland waterway-maritime corridor capable of handling vessels up to 3,000 deadweight tons," according to Friday's announcement. It will encompass canal excavation and the construction of ship locks, navigation and logistics infrastructure.

"As an inland waterway and important transport infrastructure in Cambodia, the FTC Project will become a new engine driving national economic growth,” said Wang Tongzhou, chairman of China Communications Construction Company, in the announcement. He added that “after completion, it will significantly reduce the comprehensive logistics costs in Cambodia, and promote Cambodia's industry to the middle-to-high end of the value chain."

China Communications Construction Company is the parent company of China Road and Bridge Corporation, the contractor for the project’s construction from the Bassac River to the coastal province of Kep. The massive state-owned firm has faced scrutiny for its alleged involvement in financial scandals. It is also blacklisted by the United States for its role in helping the Chinese military construct and militarize artificial islands in the South China Sea.

According to Friday’s announcement, the canal is expected to create “up to 50,000 direct and indirect jobs in Cambodia."

Critics have raised concerns that the canal could severely disrupt the Mekong Rive r's natural flood patterns. These disruptions could lead to worsening droughts and a reduction in the nutrient-rich silt essential for Vietnam's vital rice production in the Mekong Delta, a region that sustains millions and is a major global rice exporter.

The signing announcement, however, stated that "A rigorous Environmental Impact Assessment, conducted by 48 specialists, confirmed minimal environmental impact."

It added that the Cambodian government has led efforts to minimize resettlement "with a route designed to avoid dense communities and cultural sites” and that “a responsible compensation and consultation process is underway."