Cambodia is attempting to transform its logistics infrastructure and position itself better on global supply chains by building a large new canal. It has announced that it is proceeding with the Funan Techo Canal project which is an attempt to connect the Mekong River south of Phnom Penh to Cambodia’s sea ports. The canal will be 180 kilometres long, 4.7 metres deep, 100 metres wide and designed to take the types of large river barges that Cambodia already uses on its river and canal network. The cost is estimated to be US$1.7bn.
At present Cambodia’s sole major container terminal is at the port of Sihanoukville, which any new canal would provide some connectivity to, although the end of the proposed canal is east of Sihanoukville. However, the important economic impact of the canal is that it would reduce Cambodia’s reliance on the ports in the Mekong Delta, in Vietnam. At present Cambodian trade heavily uses ports in Vietnam, especially the Saigon Port Complex. This is politically sensitive as it implies that Cambodia is dependent on Vietnam for connectivity to global markets. And global markets are increasingly important to Cambodia. The country’s economy is developing a valuable clothing production sector, much of which is based around Phnom Penh.
What is unsettling Vietnam is that the canal is likely to be built and financed by Chinese infrastructure development companies. There is even the prospect that further container terminals will be built on the Cambodian coast by the Chinese.
Whilst the political issue over the balance of power between Vietnam, Cambodia and China is important, the proposed Funan Techo Canal also highlights that South East Asia is striving to develop a logistics infrastructure in order to facilitate the continued growth of its trade. As sourcing of products such as clothing, footwear, furniture and electronics assembly shifts away from China, economies such as Cambodia are positioning themselves to benefit. As also illustrated in neighbouring Vietnam, sea ports, river and road transport developments, are central to these attempts. It is infrastructure such as these that are likely to drive the logistics sector in South East Asia over the next decade, making it of increasing global significance possibly comparable to that of China.
Author: Thomas Cullen
Source: Ti Insight
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