FUNAN TECHO CANAL AND ITS RISKS FOR VIETNAM'S ECONOMIC SECURITY

ABSTRACT

The Funan Techo Canal is a major irrigation project on the Mekong River, with construction officially set to begin in 2024 by the Cambodian government. This ambitious initiative aims to strengthen Cambodia’s self-reliance in waterway transportation and provide fresh water for the agricultural region in the country's southwest. While Vietnam supports Cambodia’s legitimate development goals, it must proactively assess the economic and environmental implications of this large-scale project. This article introduces the project, analyzes the risks to Vietnam's economic security, and provides several policy recommendations.

АННОТАЦИЯ

Канал Фунан Течо - это крупный ирригационный проект на реке Меконг, строительство которого официально начнётся в 2024 году по инициативе правительства Камбоджи. Этот амбициозный проект направлен на усиление транспортной независимости Камбоджи по внутренним водным путям, а также на обеспечение пресной водой сельскохозяйственных районов на юго-западе страны. Вьетнам, поддерживая законные цели развития Камбоджи, в то же время должен проактивно оценить экономические и экологические последствия этого масштабного проекта. В данной статье представлен обзор проекта, проведён анализ рисков для экономической безопасности Вьетнама и предложены некоторые рекомендации по политике.

Keywords: Funan Techo; canal; risks; economic security; Vietnam.

Ключевые слова: Фунан Течо; канал; риски; экономическая безопасность; Вьетнам.

I. The Funan Techo Canal Project

The Funan Techo Canal Project is an ambitious infrastructure initiative by the Cambodian government, expected to transform the nation’s economy, trade, and transportation landscape. Officially launched on August 5, 2024, in Kandal Province, the project spans a massive 180 km, directly linking Phnom Penh to the Gulf of Thailand. With an estimated investment of USD 1.7 billion, the project is being implemented under a Build-Operate-Transfer (BOT) contract with China Road and Bridge Corporation (CRBC), a strategic partner. Cambodia holds 51% of the shares, while CRBC holds 49%, reflecting close bilateral cooperation [1].

Technically, the canal stretches 180 km from the Mekong River in the Takeo region, traversing four provinces: Kandal, Takeo, Kampot, and Kep, with approximately 1.6 million residents living along its banks. It is designed to be 100 meters wide and 5.4 meters deep, allowing safe passage for 3,000-ton vessels [2]. The project includes the construction of 3 sluice gates, 11 bridges, a 208-km coastal road, and support infrastructure along the canal.

Cambodia’s primary objective is to establish a strategic inland waterway connecting Phnom Penh directly to the sea, creating a new corridor for the movement of goods. Presently, most of Cambodia’s imports and exports transit through Vietnam’s seaports, including Cai Mep–Thi Vai (Ba Ria–Vung Tau) and ports in Ho Chi Minh City [3]. The new canal will reduce reliance on Vietnam by enabling more direct maritime access, cutting up to 70% of goods currently transiting via Vietnamese territory [4].

Additionally, Cambodia intends to develop satellite ports, economic zones, logistics hubs, and processing industries along the canal route to optimize economic benefits. The canal also plays a crucial role in ensuring irrigation and water regulation for agriculture and aquaculture in the region. The project is expected to generate over 10,000 jobs, reducing poverty and fostering sustainable socio-economic development [5].

However, despite its benefits, the project has drawn criticism. The Mekong River Commission (MRC) has voiced serious concerns about its potential ecological and hydrological impact on the Mekong Delta [6]. Environmentalists warn of adverse effects on flood patterns, sediment distribution, and biodiversity, which could harm millions in the lower Mekong basin [7].

In response, the Cambodian government has pledged to cooperate with neighboring countries and the international community to assess environmental risks and mitigate negative impacts.

II. Risks to Vietnam's Economic Security

The Funan Techo Canal poses several risks to Vietnam's economic security:

1. Risk of Losing Transit and Logistics Roles

Vietnam currently plays a pivotal role as a transit hub for Cambodian imports and exports, particularly through major international ports such as Cai Mep–Thi Vai in Ba Ria–Vung Tau, the Cat Lai terminal in Ho Chi Minh City, and key border crossings like Moc Bai (Tay Ninh), Vinh Xuong (An Giang), and Ha Tien (Kien Giang). These logistics gateways have historically supported Cambodia's trade flow by providing access to deep-water ports, well-developed storage systems, and customs clearance services, making Vietnam a critical partner in regional supply chains.

However, the completion of the Funan Techo Canal, which will offer Cambodia direct maritime access to the Gulf of Thailand, may significantly reduce its reliance on Vietnamese logistics infrastructure. This shift will not only result in the loss of cargo throughput and transshipment volume through Vietnamese ports but also diminish Vietnam’s role as a strategic logistical corridor in the Greater Mekong Subregion. The long-term consequence may include underutilization of existing logistics assets, declining investment interest in logistics parks and industrial zones in border provinces, and decreased revenue for service providers in warehousing, forwarding, and customs brokerage. The Mekong Delta - already vulnerable to structural economic shifts - may bear the brunt of this transition, with adverse effects on employment, regional GDP, and public infrastructure development.

2. Risk of Reduced Competitiveness of Vietnamese Ports

Vietnamese seaports have long benefited from the geographic advantage of serving as an outlet to the sea for Cambodia. The strategic location of ports such as Cai Mep–Thi Vai has allowed Vietnam to dominate Cambodia-bound international shipping routes, especially for bulk commodities and containerized goods. However, the development of a dedicated inland waterway from Phnom Penh to the Gulf of Thailand through the Funan Techo Canal poses a direct threat to this advantage.

The availability of a shorter, sovereign-controlled route for Cambodia will likely lead to a diversion of cargo traffic, significantly reducing the volume of Cambodian goods transiting through Vietnamese ports. This will result in a drop in seaport-related revenues, including port fees, handling charges, storage fees, and inland haulage income. Moreover, the strategic leverage that Vietnam currently holds in terms of regional maritime logistics could be weakened, especially if Cambodia succeeds in building modern satellite ports along the canal to capture new freight flows. In the long term, Vietnam’s competitive edge in Southeast Asia’s maritime trade landscape could be compromised, prompting the need for costly infrastructure upgrades and service optimization to maintain relevance.

3. Adverse Impacts on Agriculture and Water Resources

The Funan Techo Canal has the potential to significantly disrupt the natural hydrological flow of the Mekong River, particularly during the dry season when freshwater resources are already scarce in the Vietnamese Mekong Delta. The redirection or partial isolation of watercourses and tributaries could diminish the volume of freshwater reaching downstream areas, which are highly dependent on the seasonal flood-pulse regime for agriculture, aquaculture, and replenishment of alluvial nutrients.

A reduction in sediment flow could accelerate riverbank erosion, diminish soil fertility, and lead to the collapse of traditional farming systems. Moreover, reduced water volume will exacerbate the problem of saltwater intrusion, especially in coastal provinces such as Ben Tre, Tra Vinh, and Soc Trang - regions already severely affected by climate change and sea level rise [9]. This combination of factors threatens to lower agricultural yields, degrade arable land, and destabilize local food supply chains, putting national food security at risk. The economic fallout from these changes would be profound, affecting millions of farmers, disrupting rural livelihoods, and creating additional pressure on the government to provide social assistance and economic restructuring support.

4. Environmental Risks Leading to Economic Losses

Beyond logistical and agricultural concerns, the environmental consequences of the Funan Techo Canal may lead to far-reaching economic repercussions. The Mekong Delta is one of the most biodiverse ecosystems in Asia, home to hundreds of aquatic species and a key spawning ground for regional fisheries. The alteration of water flow and sedimentation patterns caused by the canal could threaten critical habitats, reduce fish migration, and disrupt breeding cycles, leading to a decline in fish stocks and aquatic biodiversity.

This ecological degradation would directly affect local economies that rely on fishing and aquaculture as their primary source of income. In provinces such as An Giang, Dong Thap, and Bac Lieu, thousands of households depend on the river for daily subsistence, food production, and export-oriented fish farming. A drop in aquatic yields would not only reduce household income but also strain the supply chain for seafood processors and exporters, diminishing Vietnam's competitiveness in the global seafood market [10]. In the longer term, ecological decline could trigger mass migration from affected areas, increase rural unemployment, and amplify social instability, thus compounding the economic risks posed by the project.

In short, the Funan Techo Canal presents complex, intertwined risks that Vietnam must proactively manage through multi-faceted policy responses.

III. Recommendations

To mitigate risks associated with the Funan Techo Canal, Vietnam should implement the following strategies:

1. Proactive Diplomacy and Negotiations

Vietnam should pursue a proactive and strategic diplomatic approach by engaging in both multilateral and bilateral dialogues with Cambodia. These efforts must emphasize transparency in project planning and execution, particularly concerning the canal’s potential environmental, economic, and hydrological impacts on downstream countries. Vietnam should advocate for the application of principles under the 1995 Mekong Agreement, especially the "prior notification and consultation" mechanism. Through diplomatic channels, Vietnam should push for comprehensive and participatory Environmental Impact Assessments (EIAs), conducted with oversight from international bodies such as the Mekong River Commission (MRC). At the same time, diplomacy should be used to mitigate the risk of bilateral tensions and to maintain long-term cooperation on sustainable water resource governance in the region.

2. Strengthening Logistics and Seaport Competitiveness

Facing the risk of losing transit advantages, Vietnam must act decisively to modernize and upgrade critical infrastructure at key logistics hubs, including Cai Mep–Thi Vai, Cat Lai, Can Tho, and other Mekong Delta ports. Investment should focus on deepening berths, improving road and rail connectivity to hinterlands, and enhancing the capacity of logistics parks and bonded warehouses. In parallel, customs procedures need to be streamlined through digital transformation to reduce clearance time and lower operational costs for import-export businesses. Vietnam should also promote public-private partnerships (PPPs) in port development to attract capital and technology, helping maintain its competitive edge in regional freight transport.

3. Promoting International and Regional Cooperation

Given the transboundary nature of the Mekong River, Vietnam should intensify its participation in regional mechanisms, particularly within the framework of the MRC. Cooperation with Thailand, Laos, and Cambodia should be deepened through joint monitoring programs, technical exchanges, and coordinated water management plans. Vietnam should also advocate for stronger enforcement of international conventions on shared water resource governance, including those related to biodiversity, climate adaptation, and ecological resilience. At the global level, Vietnam should seek technical and financial support from international donors such as the World Bank, the Asian Development Bank (ADB), the UNDP, and other development partners to improve its adaptive capacity to hydrological and environmental changes.

4. Developing Risk Scenarios and Water Management Systems

Vietnam must formulate and institutionalize detailed hydrological risk scenarios based on multiple development trajectories in the Mekong basin. These scenarios should account for changes in water volume, sediment load, seasonal variability, and cross-border infrastructure projects. Early warning systems must be expanded and made more accurate to alert local communities to drought, flooding, and salinity intrusion. Simultaneously, investment in smart irrigation systems, regulating sluices, water storage reservoirs, and intra-field canals should be prioritized. Agricultural policies must support the transition to drought- and salinity-tolerant crop varieties, promote rotational cropping, and apply precision farming techniques to enhance resilience.

5. Restructuring the Mekong Delta Economy

The Mekong Delta economy, currently over-dependent on traditional agriculture and low-value logistics, must undergo structural transformation. Vietnam should accelerate the development of high-value-added sectors such as agro-processing, bio-economy, eco-tourism, and digital agriculture. Value chain integration for rice, seafood, and fruit products should be enhanced through improved quality control, branding, and certification for export markets. Support for start-ups and small- and medium-sized enterprises (SMEs) in clean technologies and service industries should also be a priority. Furthermore, promoting labor re-skilling and vocational training for rural populations can help shift the workforce toward more sustainable and adaptive livelihoods.

6. Investing in Science and Research

Vietnam must invest significantly in building domestic research capacity in environmental science, hydrology, climate change, and regional development. National research institutes and universities should be empowered to carry out long-term, interdisciplinary studies on the Mekong River’s ecological dynamics and the cumulative impacts of transboundary infrastructure. The government should also establish data-sharing mechanisms and promote open-access platforms to support evidence-based policymaking. By doing so, Vietnam will be better equipped to provide scientific evidence in international forums and negotiations, as well as to formulate sound strategies for sustainable development and resource management.

7. Raising Public Awareness and Communication

Public communication strategies must be implemented to raise awareness about the potential risks posed by transboundary projects such as the Funan Techo Canal. The government, through mass media, educational programs, and civil society engagement, should foster a deeper understanding of the Mekong’s ecological importance and the urgency of protecting its water resources. Transparent communication can mobilize public opinion in support of government actions, create a culture of environmental stewardship, and enhance community participation in monitoring and advocating for sustainable development. Additionally, involving local stakeholders in decision-making processes can lead to more socially inclusive and environmentally just outcomes.

Conclusion

The Funan Techo Canal is a bold strategic project reflecting Cambodia’s ambitions for economic autonomy and global integration. However, to ensure long-term sustainability, Cambodia must balance development with environmental responsibility and regional cooperation.

For Vietnam, mitigating the economic and environmental risks posed by this canal requires a comprehensive, proactive, and collaborative approach. Only through diplomatic engagement, infrastructure enhancement, international coordination, and adaptive development strategies can Vietnam secure its economic security and ensure the resilience of the Mekong Delta and beyond.

References:

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