Is Malaysia spared impact of new China-funded mega waterway being dug through Cambodia?

A 180km canal project in Cambodia could increase China's military presence in the region, potentially threatening Malaysia's economic interests, which are already being affected by Beijing flexing its muscles in its scramble for natural resources in the highly contested South China Sea.

The Funan-Techo Canal, a US$1.7 billion initiative financed by China and part of its colossal Belt and Road Initiative to connect the mainland with the rest of the world, will link Cambodian capital Phnom Penh with the deep-sea port of Sihanoukville on the southern coast.

When completed, the 100 metre wide and 5.4 metre deep waterway will allow cargo ships weighing up to 3,000 tonnes to pass through.

An analyst warned that the canal could boost China's military capabilities in a region already strained by US-China rivalry, particularly around Cambodia's Ream Naval Base, where Beijing has been given the green light for massive infrastructure projects since 2020.

"The intensity of this great power competition poses a risk of the Chinese navy starting patrols in the Gulf of Thailand or engaging in provocative activities, particularly near the bilateral Malaysia-Vietnam hydrocarbon projects and the multilateral Vietnam- Thailand-Malaysia hydrocarbon projects," said Ibrahim Abdullah Zaik of the IRIS Institute, an independent think tank that has studied China's rise in the region.

Some have compared the project to the land bridge being planned by Thailand at Kra Isthmus, locally known as Segenting Kra, which is the narrowest part of the Malay peninsula.

In recent years, Bangkok has revived its interest in building the bridge, which was first proposed by former prime minister Thaksin Shinawatra in 2005 before he was ousted in a military coup.

The land bridge would bypass the Strait of Malacca and place Thailand at the centre of Southeast Asia's supply chains. However, the plan has so far met with little interest from the major players in the region including the US, China and Japan.

Ibrahim said that unlike the land bridge across the Kra Isthmus, the Funan-Techo Canal has no direct impact on Malaysia.

"However, China's pursuit of natural resources in the Gulf of Thailand could threaten national oil and gas projects in the area," he said, referring to the waters southwest of the South China Sea.

Malaysia and Thailand have a 7,250 sq km joint development area in the Gulf of Thailand, where they share the natural resources equally.

Malaysia also has a joint development agreement with Vietnam in the south-eastern part of the Gulf of Thailand for the exploration of gas and oil.

However, the existence of the canal enables China to expand its military capabilities not only in disputed regions but also in countries that are closely allied with China, such as Cambodia, and to establish potential foreign bases in Asia, Ibrahim said.

In addition, the project could exacerbate tensions between Washington and Beijing as the Chinese naval presence in the Gulf of Thailand, just north of Kelantan's sea border, increases.

In 2019, Cambodia rejected an offer from the US to maintain the Ream Naval Base, paving the way for China’s presence.

"Since then, Cambodia has dismantled several facilities built by the US at the base, signalling its commitment to Beijing," Ibrahim continued.

US think tank Rand Corp recently said the canal would give Beijing direct access to the Gulf of Thailand from Chinese territory via the Mekong River.

The Mekong River begins on the Tibetan Plateau and ends at the South China Sea. It crosses China and five Southeast Asian countries - Myanmar, Laos, Thailand, Cambodia and Vietnam.

According to Rand analyst Derek Grossman, the canal would give Beijing three strategic advantages: Reduce dependence on the Strait of Malacca, give the Chinese navy direct access to the Gulf of Thailand and establish Chinese influence in the region west of Vietnam.

Geopolitical analyst Collins Chong from Universiti Malaya, on the other hand, explained that although the Funan-Techo Canal would represent an additional presence in the Mekong region and on the Southeast Asian mainland, it would pose a greater threat to Vietnam than Malaysia.

"China already has the potential Ream base and the existing Southern Theatre Command headquartered in Guangdong and the Yulin Naval base in Hainan which is the primary base for the South China Sea," he said.

Cambodia is not among the seven countries - Malaysia, China, Brunei, Taiwan, Indonesia, the Philippines and Vietnam - which have territorial claims in the South China Sea.

China has flexed its military muscles in the area to back up its claim to sovereignty over the entire South China Sea, based on the so-called "nine-dash line" map, which was later "updated" to the "ten-dash line" to claim an additional area near Taiwan.

The nine-dash line had already been declared illegal by the Permanent Court of Arbitration in The Hague in 2016.

Earlier this month, China called on Malaysia to halt all activities in an oil-rich area off Sarawak waters in a leaked protest note to the Malaysian embassy in Beijing.