The BGA Cambodia Team, led by Managing Director Bora Chhay, wrote an update to clients on the Funan Techo Canal.

Context

  • Cambodian Prime Minister Hun Manet on August 5 broke ground on the $1.7 billion Funan Techo Canal. The megaproject is designed to boost trade and regional connectivity by linking the capital Phnom Penh to the country’s southern coast in Kep province and the deep-sea port in Sihanoukville.
  • The canal will be constructed via the build-operate-transfer model in a collaborative venture between Cambodian and Chinese companies. As the project’s developers and asset owners, they could have rights to operate for up to 50 years, though this is subject negotiation. The Cambodian companies, which collectively have a 51 percent stake in the canal, include the Sihanoukville Autonomous Port, the Phnom Penh Autonomous Port and the Overseas Cambodian Investment Corporation. The China Road and Bridge Corporation has a 49 percent share in the project. The canal is slated for completion in 2028.

Significance

  • The Funan Techo Canal is capable of accommodating cargo ships with a 3,000 deadweight tonnage in the dry season and 5,000 deadweight tonnage in the rainy season. The canal is strategically positioned near 14,000 factories that employ more than 1 million workers in Phnom Penh, Kandal, Takeo, Kampot and Kep provinces.
  • The canal will significantly reduce shipping times, distances and costs by 70 percent. According to the Ministry of Public Works and Transport, the canal will provide a boon to Cambodian exports, including garments, footwear, travel goods, agricultural products and other goods, reducing shipping cost by $300 per container. This is expected to increase the competitiveness of Cambodian goods in the global market, especially agriculture products that can be exported directly from the four provinces located along the canal.

Implications

  • The Funan Techo Canal is expected to deliver significant benefit to Cambodia’s political, social, economic and transport environment. Its developers aim to ensure competitive shipping and logistics costs, increase trade volumes, cut transport times and reduce Cambodia’s reliance on costly intermediaries.
  • Cambodia expects to earn $88 million annually in the first year from canal freight costs and to earn $570 million annually by 2050. The canal will help increase the freight activity in Sihanoukville Port from the current 67 percent to 90 percent.

We will continue to keep you updated on developments in Cambodia as they occur. If you have any comments or questions, please contact BGA Cambodia Managing Director Bora Chhay at bchhay@bowergroupasia.com.

Best regards,

BGA Cambodia Team

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Managing Director

Bora leads BGA’s practice in Cambodia. He is a highly regarded government affairs and public policy expert who helps clients resolve business issues, navigate regulatory and legal challenges, expand operations, explore new investment opportunities and enter Cambodia’s market.  Prior to joining BGA, Bora served for five years as a fast-moving consumer goods (FMCG) corporate and regulatory affairs professional. In this role, he helped transform his company’s government relations and corporate affairs unit into a more effective business-driven group. Notwithstanding Cambodia’s difficult and highly regulated macro environment, Bora played a key role in developing and executing government relations and corporate affairs ... Read More