State news agency WAM reported that on Wednesday the UAE government sanctioned federal law to set up an AED1bn ($272m) railway company.

It has been learnt that government would 100 percent own the Etihad Trains Company, which would require transporting goods and passengers apart from investing in a countrywide rail network that would link the emirates.

The new company, which would be run by at least seven board members, would specialize in leasing, owning and selling trains.

WAM reported, "According to the decree, the "Etihad Trains Company" shall, among other objectives, strive to link the rural areas with the urban areas of the country to accelerate growth and development in the country and facilitate easy, cheap and safe means of transport of passengers and goods, to minimise environmental pollution stemming from carbon combustion from cars on the roads and highways."

The chief executive of Etihad Trains would be Richard Bowker who is the outgoing boss of UK rail and bus group National Express and would step down from the post on July 10.