Deputy Prime Minister Najib Razak said the proposal from Malaysian property and utility firm, YTL Corp, would be considered by the cabinet once it was received.

"I don't want to pre-empt ... the decision. Let us study the proposal first. When they are ready to submit to the government, I'm sure it will be brought to cabinet," he told reporters.

When asked if the deal would require bilateral discussions, Najib replied: "Obviously it has to, yes."

YTL's managing director, Francis Yeoh, who proposed the eight billion ringgit ($2.2 billion) rail link, has reportedly said the Malaysian and Singapore governments have been informed of the plan.

But difficulties may lie ahead in talks, with bilateral relations strained earlier this year as Malaysia scrapped long-held plans to build a bridge to Singapore after a decade of prickly negotiations.

A host of other bilateral issues are also unresolved, including the price of water that Malaysia supplies to Singapore and the future of Malaysian-owned railway land.

Transport Minister Chan Kong Choy said the government had already given YTL and its consortium permission to conduct a feasiblity study for the link, according to a report Friday.

"We have given them the green light. Informally, they have told us the project is feasible," he was quoted as saying in the New Straits Times.

YTL's proposed rail link is from Malaysia's capital Kuala Lumpur to the island republic and would cover the 325 kilometres (200 miles) in 90 minutes.

Currently, there is a rail service to Singapore but it takes about seven hours while flights between the countries are pricey.

Malaysia and Singapore are linked by a causeway which is routinely subjected to heavy traffic.

Yeoh reportedly said construction would take about three years and if it was approved, YTL would go to the global markets to raise the needed finance.

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