Cambodia will start work this year on a controversial plan to dig a 180km canal to link Phnom Penh to the sea, The Star newspaper reports.

The Funan Techo canal, which is expected to cost $1.7bn, will link the capital to the country’s only deepwater port at Sihanoukville and a new port at Kampot.

China Road and Bridge Corporation, a subsidiary of China Communications, will build it over four years.

The project has raised concerns in America and Vietnam.

Wesley Holzer, a public diplomacy officer at the US embassy in Phnom Penh, said the Cambodian people, along with people in neighbouring countries, would “benefit from transparency on any major undertaking with potential implications for regional water management, agricultural sustainability, and security”.

Vietnam has expressed concern about the impact of the canal on the fragile ecology of the Mekong basin and is also reported to be concerned that it will allow Chinese navy ships to approach its territory.

Cambodian officials have rejected these concerns, insisting that Cambodia’s constitution ensures its neutrality.

Former Prime Minister Hun Sen, who stepped down last year and handed power to his son, commented last week that foreign observers were “fabricating” a claim that the canal “will further facilitate the Chinese navy near the Vietnamese border even when the canal is still under construction”.