PHNOM PENH—Cambodia can successfully implement the flagship Funan Techo Canal if it effectively undertakes key elements such as managing potential cost overruns through sound financial planning, implementing risk mitigation strategies, and addressing public grievances by keeping key stakeholders engaged through effective communications.

The 180km canal is regarded by the government as a mega inland waterway transport project that links the Mekong River with the Bassac River through artificial canals, before joining the sea after passing through Phnom Penh, Kandal, Takeo, Kampot and Kep.

If this massive undertaking can be completed successfully, Cambodia will be poised to acquire a vital and new integrated waterway transport system.

This would reinforce the country’s economic renovation and upgrade logistic transportation holistically, which in turn would promote more vibrant development.

The recent visit of Chinese President Xi Jinping brings a fresh perspective for fulfilling the Funan Techo Canal.

Deputy Prime Minister Sun Chanthol and Wang Tongzhou, chairman of China Communications Construction Company (CCCC) presided over the signing of five agreements,  a Public-Private Partnership (PPP) Contract, Shareholder Agreement, Investment Agreement, Engineering-Procurement-Construction (EPC) Contract, and the Operation and Maintenance (O&M) Agreement—to formalize the full framework for the implementation of the canal project, now estimated to cost $1.156 billion.

Major works include canal excavation, construction of ship locks, and supporting navigation and logistic infrastructure. Renewed impetus has been injected through these agreements.

Given the scale of the project in terms of cost, complex operations and multiple layers of stakeholder involvement, the undertaking can be considered a mega project.

The success of any mega project requires meticulous financial planning to address potential overrun costs, proper risk mitigation schemes to avert project derailments, and fair resolutions to public discontentment through effective communication among proactive stakeholder engagement.

Properly managing these elements would help enhance the success rate.

First, it is crucial to carefully undertake detailed financial planning to avoid cost overruns to ensure that the project is feasible, sustainable and beneficial by effectively allocating resources, managing costs, securing funding, and mitigating risks.

It is important to define the financial framework that could guarantee resource availability and improve transparency and control.

Appropriate financial planning is essential as it helps manage the complexity and scale of such undertakings to ensure the availability of the necessary financial resources, guarantee the efficient and effective use of financial resources, identify and manage financial risks, and improve financial transparency and control in the project.

Past experience in the region and worldwide have shown that despite planning, cost overrun tends to be a major feature in mega projects. Research studies show that mega projects are prone to exceed the initial budget due to a combination of factors, including underestimation of costs and unforeseen circumstances such as geological conditions.

For example, the 145km Jakarta-Bandung High-Speed Railway, a project born from cooperation between Indonesia and China under the Belt and Road Initiative,  was costed at $5.5 billion in 2015.

When the project was completed in 2023, the cost overrun was estimated to be $1.2 billion due to issues such as hikes in the price of materials and machinery, land acquisition delays, and the need for special measures to address unstable soil conditions along sector of the railroad link.

The Indonesian government used state funds and additional loans from China to finance these excesses. Avoiding this pitfall would be a valuable consideration for Cambodia’s contingency financial option.

Second, risk mitigation is another crucial element to help realize successfully the project.Key risks to mega projects include schedule delays, technical challenges and political/regulatory hurdles.

Environmental, social, and communicatory risks, along with issues related to many stakeholders and ineffective management, can significantly impact project implementation and success.

By mitigating these risks, Cambodia would foster success. Commendable and comprehensive risk planning are very much needed to deal with these risks continuously, including finance, project management, resource utilization, socioeconomic conditions and environment issues.

This exercise would give the country a chance to optimize time and resources to explore options to safeguard or minimize the project from risks of delays and derailments.

 Third, addressing fairly public complaints by enhancing stakeholder engagement through proactive communication is another vital ingredient to help the canal succeed.

Given its scale and complexity, the project attracts considerable public attention that can turn into grievances that could affect people, especially those who live nearby.

Grievances stemming from large-scale development projects are inevitable. They derive from issues, including social, environmental, and economic impacts on communities.

These can range from displacement and loss of livelihoods to environmental damages, unfair compensation and unequal distribution of benefits. Therefore, effective grievance resolution mechanisms are crucial for addressing these concerns and promoting project sustainability.

It would be wise for the government to set up local complaint offices throughout project sites to monitor and alleviate community or individual discontent.

This would constitute an excellent and effective stakeholder engagement that promotes active feedback from groups or individuals affected by the canal operations.

Local authorities should avoid the abuse of power and be well exposed to an effective grievance resolution process that is fair, transparent and accessible to all stakeholders.

To effectively manage grievances in this large project with local individuals requires proactive communication, collaborative culture-building, and structured resolution processes.

By promoting open dialogue, encouraging constructive feedbacks, providing fair compensations for the loss of livelihood and personal properties, and addressing disagreements promptly, the project can look forward to a healthy and productive working environment.

If realized successfully, the Funan Techo Canal will be an important project to foster national development.

To enhance its success, Cambodia must exercise its prudent agency in crucial areas, including addressing potential over-costs, risk mitigation and stakeholder engagement.

Effectively undertaking these key elements would further pave the way for the realization of the Funan Techo Canal of tomorrow, which warrants a brighter future for Cambodia.

Nhuon Keumsou is a research associate at the Cambodian Center for Regional Studies