Israel's government yesterday gave the green light to build the first rail link between its Mediterranean and Red Sea coasts, offering a new Asia-Europe trade route to compete with the Suez Canal.

"This is a strategic decision," Prime Minister Benjamin Netanyahu told ministers at the cabinet's weekly meeting.

"In the coming decade, new (economic) powers will arise," a statement from his office quoted him as saying.

"It is within our power to create an alternative transport route, bypassing the Suez Canal," the statement said.

At an initial cabinet meeting on the project last week, Netanyahu said the plan had "created very great interest among the emerging powers, China and India, and others."

Netanyahu's office said the first stage would be to choose between three alternative financing schemes - a bilateral agreement "between Israel and another government," a partnership between the Israeli government and local investors, or full government funding.

The transport ministry says its preferred option is a joint project with China.

AFP