Page last updated at 11:35 GMT, Wednesday, 3 September 2008 12:35 UK

Syria stands at economic crossroads

By Lina Sinjab
BBC News, Damascus

Traditional craft in Damascus
Weavers produce silk brocade using techniques used for generations
The world's oldest inhabited city is changing.

Traditional industries that have given Damascus its distinctive character are now competing with Western imports.

In a historic market in the city centre, Kenan Tafesh is weaving a seven-colour silk brocade using a traditional loom and techniques used for generations.

It is the kind of industry Syria has relied on for centuries.

"This is a very important industry. It is the symbol of Damascus. You cannot mention Damascus without thinking of the brocade," he says.

But ancient Damascus is getting a 21st-Century facelift.

Pavements are being dug up and jasmine trees planted as part of a huge beautification project.

Expensive tastes

Since biblical times, Straight Street in the Old Town has been the home of merchants making and selling carpets, soap and spices.

But among the warren of traditional industries, a newcomer has set up shop.

Foreign companies that have interests in Syria will have to defend their interest in Syria
Commentator Jihad Yazigi
Villa Moda has brought luxury designer brands to Syria for the first time.

The shop has opened not only because there is a market for expensive fashion, but because the government has relaxed rules on foreign business start-ups.

The owner is Kuwaiti prince and self-styled "Sheikh of Chic" Majed al-Subah - one of the main foreign investors in Syria.

"There's a huge demand for business like this," he says.

"Syria may have a bad reputation, but businesses should come here and see for themselves."

Socialism to capitalism

Costa coffee in Damascus
Changes give a new meaning to the idea of a Syrian coffee house
This socialist state has introduced a range of new laws which have opened Syria to international and private business.

In the past year, cappuccino culture has arrived, with the opening of international coffee chains.

Many of the customers in such cafes have studied and worked abroad - and are bringing now their experiences back home.

"This country is seriously booming," says one of a group of young women in western clothes. "Everyone dresses up, the places are new, the roads are clean. We are not going to be third world for the rest of our life."

Part of the new strategy is to use business to improve relations with other countries in the region and in the West.

"It is a way for Syria to break the isolation, because by attracting investment you are having foreign companies that have interests in Syria and they will have to defend their interest in Syria," says economics commentator and Syria Report editor Jihad Yazigi.

"It's a circle. More investments improve political relations and political relations attract more investment and more investments"

Rising prices

Syria has been a socialist country led by a single party for decades.

People must believe in the opportunities that this new economy offers them and move away from depending totally on the state for finding jobs
Deputy PM Abdullah Dardari
Deputy Prime Minister Abdullah Dardari, who is spearheading the economic reform programme, says the changes present opportunities and challenges.

"They are a challenge for social equity, for stability and they are challenge to the status quo," he says.

"What we need to have is the culture of an open and integrated economy, people to believe in the opportunities that this new economy offers them and move away from depending totally on the state for finding jobs."

But most people in Syria are yet to feel the effects of foreign investment.

In a food market in Damascus, people are haggling over the price of vegetables.

"My husband is a civil servant and yet we cannot afford to live any more. We have to prioritise our purchases," one shopper tells me.

In May, the government cut fuel subsidies, leading to a 300% increase in the cost of diesel, with a huge knock-on effect for prices.

International effect

In downtown Damascus, you can now dance the night away in an open-air rooftop bar that would not be out of place in any European capital. It costs about $20 (10) to enter, which is half the average weekly wage in Syria.

Villa Moda
At Villa Moda the setting is Syrian but product lines cater for other tastes
But liberalisation of the economy has brought international jobs and increased some salaries in the private sector.

Business student Omar drinks his tequila, and wonders how people can afford places like this.

"For me I do some work, I can afford it, but I don't save money, that's the thing," he says.

The waiters make about 25 a week. For Amaar Mohammed, it is one of his two jobs.

At the end of his shift in the early hours of the morning, Amaar transforms from nightclub waiter to school teacher.

"Life is becoming harder. You have to work hard to survive. I'm working just to buy a simple home. I don't dream of anything else," he says.

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