Malaysia awards $1 billion rail project to Indian firm

Kuala Lumpur: Malaysia has awarded a US$1.08 billion (€730 million) railway contract to an Indian company, the deputy prime minister said Monday, as the two countries stepped up military ties during a visit by India's defense minister.

Although the contract awarded to the Indian Railway Construction Co. is not related to defense, it is a reflection of the growing ties between the two countries in all fields, Indian Defense Minister A.K. Antony said.

''This is a signal that they are encouraging Indian investment. That means all-round (cooperation): defense, trade, commerce, education, health services,'' he told The Associated Press.

The two sides said a 31-member Indian Air Force team will arrive in Malaysia next month to train pilots on Russian-made Sukhoi Su-30 MKM fighter jets _ a rare foreign project by the Indian armed forces.

Antony's three-day trip to Malaysia, a month after he visited Vietnam, is part of Indian efforts to expand military ties with Southeast Asia _ a region it long neglected when it was an ally of the former Soviet Union during the Cold War.

India has been making friends with the U.S. and its Southeast Asian partners such as Malaysia and Singapore since the Soviet Union's demise. India is particularly interested in wooing Malaysia, which has deep military links with Pakistan, New Delhi's archrival.

The Indian Air Force team will be based in Malaysia for two years as part of an agreement signed last year. A batch of 55 Malaysian air force personnel began training in India on Dec. 17, and 47 more will be sent in March, Deputy Prime Minister and Defense Minister Najib Razak said.

The rail contract puts to rest a major controversy that had soured relations between the countries. In 2001, Malaysia awarded a US$3.5 billion double-tracking project to the same Indian company, but withdrew the contract two years later without explanation.

Last year, Malaysia invited India to resubmit its bid for the project. Indian officials said the company was awarded the smaller contract last month to double-track 100 kilometers (60 miles) of rail line for 3.45 billion ringgit (US$1.08 billion; €730 million).

It was officially announced by Najib, who said bilateral trade was expected to hit US$8 billion (€5.4 billion) this year.

''In the area of business, the double-tracking railway project that we have awarded to IRCON was most significant and it should be implemented this year,'' he said, using the Indian company's acronym.

Najib said the two countries are also exploring possible cooperation in the operation and maintenance of French-made Scorpene submarines but declined to say whether there would be joint exercises involving the warships.

Malaysia expects to receive two Scorpenes next year, while India has purchased six of the submarines which will be delivered in 2011, he said.

Antony, who met with Najib and Foreign Minister Syed Hamid Albar on Monday, was to hold talks with Prime Minister Abdullah Ahmad Badawi on Tuesday before flying home.