Cambodian minister calls outcry over 180km canal project ‘double, triple standards’

PHNOM PENH – Cambodian Deputy Prime Minister Sun Chanthol has called the outcry over the country’s upcoming its US$1.7 billion (S$2.3 billion), 180km canal project an exercise of “double, triple standards”.

He pointed out that the government has already fulfilled its obligations by notifying the Mekong River Commission (MRC) of this matter – but is now being pressured to do more.

In an interview with The Straits Times on June 26, he also said that two Cambodian state-owned enterprises will be taking on total debt of possibly US$250 million as co-investors of the Chinese-backed Funan Techo Canal project, which will break ground on Aug 5.

When completed, the 100m-wide, 5.4m-deep navigation canal will connect Phnom Penh’s inland port near the Mekong River to the country’s coast and reduce the need for Cambodian products to transit through Vietnamese ports.

Based on the jobs it will generate and wider development it will spur, it is estimated to give an economic internal rate of return of 20 to 31 per cent – over and above what is typically required for projects to get World Bank or Asian Development Bank funding, he said.

Some experts are worried that the canal would worsen conditions in the Mekong, which is already distressed from overfishing, dam-building and pollution.

Researchers from the US-based Simson Centre say that the high levees expected to be used for this project will reduce wet season flooding, which is important for natural wetlands and agricultural production in Cambodia and Vietnam.

In Vietnam, some researchers have alleged that the project could reduce water flow in two rivers in the Mekong Delta by as much as 50 per cent. Another worry voiced in Vietnam is that the new canal could facilitate Chinese military access, a claim Phnom Penh has dismissed.

Cambodia, Thailand, Vietnam and Laos are members of the MRC, an inter-governmental body through which they try to manage the river’s resources.

In August 2023, Cambodia sent a notification to the MRC about this project, labelling it as a tributary project. Unlike projects on the mainstream of the Mekong River, those on its tributaries do not need to go through prior consultation with other MRC members.

Cambodia has so far not made public its feasibility study, which it says was conducted over 26 months and involved hydraulic experts from China.

Pointing out that Laos, Thailand and Vietnam had followed the same process to notify the MRC about their projects on the Mekong’s tributaries, Mr Sun Chanthol said: “We are not obligated to provide the information. But we will provide as much information as we can to (Vietnam) to alleviate the concern.”

Cambodian officials have been speaking to the MRC about its request that Cambodia give a presentation, he disclosed.

Water-modelling simulation found that the canal would impact just 0.06 per cent of the Mekong River’s daily outflow during the dry season, he said.

“Our canal is like a straw,” said Mr Sun Chanthol, who is also the first vice-chairman of the Council for the Development of Cambodia, a government agency which oversees investment and development of the country. “How much water you can suck from the Mekong River with a straw?”

The project will be conducted under a build-operate-transfer model, under which a Cambodian-Chinese joint venture will build and run the canal for a certain number of years before handing it back to the government. The length of the concession period has not been decided.

Two state-owned enterprises, the Sihanoukville Autonomous Port and the Phnom Penh Autonomous Port, will own 51 per cent of the joint venture together with a private Cambodian company. The other 49 per cent stake will be taken up by China Road and Bridge Corporation, a major Chinese state-owned construction company.

Funding for the project is expected to come from a Chinese loan but details have not been confirmed, pending a detailed breakdown of costs, said the minister.

Depending on the financing model chosen, the two state-owned enterprises could carry on their books about US$250 million in total debt, he said, calling it manageable.

According to a joint World Bank and International Monetary Fund analysis conducted in 2023, Cambodia remained “at low risk of external and overall debt distress”. In 2022, bilateral debt accounted for about 70 per cent of Cambodia’s total external debt, and more than half of that was owed to China.

Mr Sun Chanthol dismissed the perception that China had significant influence over the direction of infrastructure development Cambodia. It was Phnom Penh which set the agenda, he said, before requesting Beijing and other development partners for funding.

“The Chinese never requested us to build XYZ infrastructure. Never. Ever. We are the one that work out our strategy for the infrastructure development of our country and then submit it to them to request them to finance the project.”

Cambodia has a masterplan of 174 infrastructure investments that it wants to prioritise in the 10 years to 2033, covering railway, river transport and road projects that would come up to US$36.6 billion.

“The biggest challenge is just to get the funding,” he said, noting that some funders take three to five years to evaluate projects before giving them the go-ahead.  “We want to move fast. But the procedures of our foreign partners are not as fast as we want.”