The cabinet Sunday approved construction of a new high-speed train line between Tel Aviv and the southern port city of Eilat.
The electrified line will reach top speeds of 300 kilometers per hour, allowing it to complete the trip in two hours.
The 350-kilometer route, which will include 63 bridges and five tunnels, will be completed by 2017, said Transportation Minister Yisrael Katz.
Katz, who submitted the proposal to the cabinet, told the ministers the initial plans would be completed by April and all legal issues would be resolved by the end of the year.
The express train to Eilat will stop only in Be'er Sheva. A local train will make eight stops along the way, at stations that have yet to be built.
Prime Minister Benjamin Netanyahu told the ministers the new line would be an alternative route to the the Suez Canal.
It is not yet clear to what extent the government will fund the venture and to what extent the line may be funded, and built, by private businesses.
Katz proposed a third option: granting the Chinese government the right to take part in building the train line. He said he had reached an agreement with his Chinese counterpart to pursue cooperation between the two countries on transportation projects, including the Eilat line.
Finance Ministry officials objected, saying it was necessary to issue a tender first.
Labor Party chairwoman Shelly Yachimovich said the China plan should be shelved because it would require Israel to bring in thousands of Chinese workers.
"It seems to me even Finance Minister Yuval Steinitz, who believes in taking every opportunity to restrict the government's responsibility to its citizens, understands this time that the government must see to the employment of Israelis, not the Chinese," Yachimovich said.
The project will be managed by the Israel National Roads Company. The new rail line will be used by both passenger and cargo trains.
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