Iraq's city of Najaf has awarded a Canadian company a $600 million contract to build the country's first monorail, an official said on Saturday.

Anwar al-Haboobi, a member of the Najaf investment committee, told Reuters the project will be only the second of its kind in the Middle East after Dubai. The contract was awarded to TransGlobim International (Globim), a privately-owned Canadian consortium.

The monorail is one of a number of large-scale infrastructure projects discussed by Iraqi officials since the fall of Saddam Hussein, including a plan for a multi-billion dollar Baghdad metro, none of which has been built.

Najaf, one of Shi'ite Islam's holiest sites, hosts hundreds of thousands of pilgrims at rites several times a year, jamming its mediaeval streets.

"This project will ease the transport crisis and the clogged streets in the province, especially during the blessed days of rituals," Haboobi said.

Iraq's infrastructure has been badly decayed by decades of war, international sanctions and underinvestment.

Now emerging from the sectarian warfare unleashed after the 2003 U.S.-led invasion but still suffering frequent insurgent attacks, the country is seeking ways to fix its roads, railways, ports, power plants and other basic infrastructure.

The outgoing government of Prime Minister Nuri al-Maliki signed 11 deals with global oil firms to develop Iraq's vast oil reserves. Economists say Iraq must grow its non-oil sectors if it is to have a viable economy and reduce unemployment.

While overall security has improved, an inconclusive election in March which produced no outright winner and as yet no new government has fuelled concerns of a return to uncontrollable violence. As a result, most foreign investors outside the oil sector are still keeping to the sidelines.

The Najaf monorail project will be finished in three years and be carried out in two stages, Haboobi said. The Canadian company will build a power plant to run the train, he added.

On its website, the company said the project involved the construction of 37 km of monorail linking the three major Shi'ite mosques in Najaf - the Imam Ali, Kufa, and Sahla shrines - and also linking two main bus depots. The second phase will link the new Najaf airport..-Reuters