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Dubai's ruler Sheikh Mohammed bin Rashid Al Maktoum has endorsed AED1.5bn ($408m) plans to extend the Business Bay Canal Project which aims to create a new tourist hotspot in the emirate.
Sheikh Mohammed, also UAE's vice president and prime minister, said work on extending the canal from Sheikh Zayed Road to the Arabian Gulf will be completed in two years.
Mattar Al Tayer, chairman and executive director of the Roads & Transport Authority (RTA), said in a statement that it was a "key strategic project" which would transform the area.
Longer-term, Al Tayer said floating hotels and restaurants could be built to line the canal, creating a new attraction for visitors and residents.
The project, which is being undertaken by the RTA, encompasses the extension of the water canal from the Business Bay to the Arabian Gulf in a waterway stretching 2.8km.
The canal will cross Sheikh Zayed Road and pass across Safa Park, Al Wasl Road, and Jumeirah 2 before reaching the sea - creating a waterway for leisure navigation.
"This canal will ensure the replenishment of water supplies in the entire Business Bay Canal automatically without any need for pumps," said Al Tayer.
The project has been divided into three contracts - the first covers drilling and landscaping works as well as the construction of marine transit stations.
The other two contracts relate to road and bridge projects, and the entire project is set for completion in early 2015, added Al Tayer.
The RTA will also carry out improvements to key roads intersecting the canal as well as the surrounding areas such as Jumeirah and Al Safa.
Tracks dedicated to jogging and cycling will also be constructed along both sides of the canal, alongside extensive landscaping works and tourist-oriented projects.
Al Tayer said: "The water canal will generate a plethora of business and investment opportunities including the possibility of utilising it to harbour floating hotels, constructing hotels and restaurants on both sides in addition to the introduction of integrated tourist & recreational facilities in Al Safa Park."
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