Iranian and South Korean companies have signed a contract worth 720 million euros to jointly build 450 rail carriages for use in suburban Tehran, an official says.

Hyundai Rotem, a South Korean manufacturer of rolling stock, signed the agreement with the Iranian Rail Industries Development Co (IRICO) in Tehran Saturday, deputy head of the Islamic Republic of Iran Railways Babak Ahmadi said.

Two-thirds of the carriages will be manufactured in Iran and the rest in South Korea which will also provide finance, Deputy Minister of Roads and Urban Development Saeed Mohammadzadeh said.

“The duration of the project is 78 months, and the first set of the carriages will be delivered in less than 1.5 years,” he said.

Iran's Minister of Roads and Urban Development Abbas Akhundi (2nd L) addresses a meeting with South Koreans in Tehran, Dec. 2, 21017. (Photo by IRNA)

South Korea's Eximbank signed a contract with Iranian banks in August to provide 8 billion euros ($9.4 billion) in loans for financing various projects by South Korean companies in Iran.

Mohammadzadeh said the contract also includes transfer of technology, enabling the state-owned Iranian company to manufacture rail carriages under license.

Tehran and other major Iranian cities are aggressively developing a mass-transit system in which metro transportation plays a vital role.

In July, French transport company Alstom signed a joint agreement for the construction of metro and suburban railroad cars in Iran.

Much of Iran's transportation is road-based marked by high accident and casualty rates. Mohammadzadeh said with the completion of the new project, 70 million seats will be added to Iran's rail fleet a year.