Plans to establish a sister site to London's Victoria and Albert Museum (V&A) as part of a new waterfront development in Dundee have been given a boost after the Scottish Government backed the scheme.

Culture minister Michael Russell revealed that the government will provide both funding towards the construction of a new building for the museum and ongoing financial support once budgets are set in the next strategic spending review. It is expected that the V&A at Dundee will house contemporary collections from the main London site, provide a showcase for Scottish applied arts and design and create a large gallery space capable of accommodating international touring exhibitions.

A V&A Project Steering Group comprising representatives from Dundee City Council, Scottish Enterprise, the University of Dundee and University of Abertay and the V&A is expected to name its preferred location for the new museum in October, before a fundraising campaign and international design competition gets underway. Russell said: "Dundee has made huge strides in recent years and I've been struck by the co-ordinated approach to regeneration work in the city. This project could be a dramatic new chapter in the life of Dundee to position the city as an international art destination and a thriving centre for our creative industries.

"There must be a sustainable long-term future for this project and lasting benefits for the local community and surrounding area. Projections show that an additional 500,000 visitors could be attracted to Dundee, along with the creation of up to 900 local jobs and an additional £5.7m output to the Scottish economy."