Japan and Russia will set up a working group that includes Japanese firms with cutting-edge technology to improve living conditions in Russian cities by upgrading public transport and waste disposal facilities, sources close to the matter said.

The move comes as the two countries work on an eight-point economic cooperation package Prime Minister Shinzo Abe proposed to Russian President Vladimir Putin in May.

The package is believed to be part of Tokyo’s efforts to make progress on resolving a decades-old territorial dispute over Russian-held, Japanese-claimed islands off Hokkaido when the leaders hold their next summit in December, in Japan.

The two governments plan to embark on a pilot project in the southwestern city of Voronezh, which has a population of about 1 million, and expand to other regions, the sources said Friday.

Putin has a strong interest in developing cities that have been grappling with issues ranging from traffic congestion and waste disposal to obsolete housing, the sources said.

The working group, which will include Japanese and Russian governmental bodies and companies, will study introducing high-tech traffic lights to alleviate congestion and a system to utilize waste heat from an incineration facility to heat pools and houses, sources close to the matter said.

The territorial dispute over Etorofu, Kunashiri and Shikotan, as well as the Habomai islet group has prevented the two countries from signing a formal peace treaty to end World War II.