A challenge for merchant class


DAMASCUS, Syria - Salem Hamadani pulls a Persian rug from a tall pile and unfolds it on the floor of his shop in the heart of the Old City. He is speaking Italian.

He touts the carpet's origin, style and quality to a pensive tourist. She studies the design but does not smile. He reaches for another carpet, then another, until his floor is buried beneath a half-foot-thick layer of multicolored, closely knotted wool.

Still no sale.

"We have difficulty buying, and we have difficulty selling," Hamadani says, switching to English. But he loves the work. "It's in my blood."

This is how men in his family have earned their living for generations, in a bustling city that has been a crossroads for travelers, merchant center and gateway to Asia for thousands of years.

It takes Hamadani five minutes to walk from his home in the Jewish Quarter to the frantic marketplace that still exudes the essence of the Middle East.

In his shop steps away from the Azem Palace, an 18th-century landmark, he plies time-tested skills: multiple languages; a knowledge of rugs, silks, antique furniture and Near East crafts; and a confident, though never perfect, sense of what a customer wants.

The only up-to-date touches visible are a credit card machine and mobile telephone.

But now there's a new breed of Damascus merchant, exemplified by Samir Younes and the gleaming blue-tiled floor and modern conference room at his establishment just off the city's embassy row.

His firm deals in computers and does it all: installing and repairing equipment, developing networks, designing Web pages and training clients.

Younes studied systems analysis in Spain and economics and business administration at the University of Damascus. He commutes in a Land Rover Freelander that he bought used for $40,000.

After decades of isolation from Western-style economic development, Syria is breaking free of its state-controlled, socialist past and entering the age of information technology under its new president, Bashar el Assad.

The infant high-tech market is part of a process of opening Syria to world markets. The ruling Ba'ath Party has moved to allow private banks, develop a stock market, run state enterprises along competitive lines and permit private universities that will compete with a system now geared mostly to train civil servants.

So far, only 10,000 people are officially hooked up to the Internet through Syria's two servers, one run by the government and a second run by the Syrian Computer Society.

Lines to the server are frequently busy, and the state blocks access to pornographic Web sites and any site whose address ends in .il - for Israel.

Sami M. Khiyami, an information technology consultant and a member of the Computer Society, said the restricted use was necessary while the country worked to build an infrastructure to handle more volume. But he predicts 100,000 users by the end of the year and a half-million by the end of 2003.

Major economic change is still more in the form of plans than practice. The country lacks a regulatory environment that would make investors feel their money is safe. Indeed, private investment today is only half what it was in the early 1990s. Growth is low, unemployment is about 20 percent, and per capita income stands at $1,200.

Since mobile telephones became widely available within the past year, kiosks selling new models have sprung up around the city. But one salesman acknowledged hedging his bets: He keeps a side business trading in black-market currency.

Flickers of prosperity appear amid low-wage want. At the Cham Palace Hotel, a liveried worker appears to be assigned full time to buff scuff marks off the polished black stone entryway. Virtually every office employs a man whose sole task seems to be to regularly bring tea or coffee.

On the streets, imported new cars cruise alongside 30-year-old Peugeot taxis and 1950s-era American behemoths, passed from father to son. The cars' hammered fenders and repeat paint jobs testify to continual use.

The government's plans haven't disrupted ways of doing business among the city's merchants. Traditionally, Syrian shopkeepers have remained bastions of private enterprise outside the state-controlled economy. Prominent merchants maintained their quiet influence by offering money-making opportunities to high-ranking army officers.

Both Hamadani and Younes are contemporaries of Syria's new president, and say they have done well since he inherited power from his father, Hafez.

Hamadani, 35, has doubled his staff of salesmen to four to handle what he says is a growing number of tourists drawn by Syria's more welcoming climate and relative safety. His shop is on almost every visitor's path, around the corner from the famed 8th-century Umayyad Mosque.

"Things are getting very easy now," he says.

He is one of about 120 remaining members of a Jewish community that used to number in the thousands. Most, including other members of his family, have emigrated since Hafez el Assad eased restrictions on their departure in the early 1990s. Hamadani says he briefly joined his father and brother in business in the United States, but didn't like it.

"Here it's easier than in the U.S.," he says. "Over there, there is big competition." He plans to stay in Damascus but longs for a peace that would allow him to spend the Sabbath in Jerusalem.

Younes, 40, started "very low, very slow" in 1985, when computers in Syria were the preserve of the privileged few, major companies and foreign embassies. Now he has all the business he and his staff of eight can handle. Four are salesmen; the others develop computer networks or company Web sites.

"You know our president likes computers," he says. Brand-name products such as IBM remain prohibitively expensive for most potential customers, and he instead buys lesser-known brands through an agent in Dubai, on the Persian Gulf, and sells them for $700 to $900.

Pirated software used to be standard equipment, and the United States has urged Syria to update and enforce its copyright protection laws. Younes says the new computers have affordable, licensed software. He hopes he's building a base for what promises to be "a very big business." He's even prepared to sell his Land Rover to finance expansion.

Despite its late start, Syria has a bright future in high tech, Khiyami argues, particularly in developing software and performing systems analysis for the Arab market.

But it's unclear whether Syria's traditional merchant class, despite its centuries of experience, will find its own niche in the world market.

Traditional crafts and businesses could be an important asset, if properly used. Syria, says Khiyami, should identify and concentrate on producing unique goods - from textiles to apricot jam - that have global markets.

Thanks to cheap labor and utilities, comparatively low taxes (in part because auditing is rare), Syria could offer an attractive investment climate: "One has to be immensely conscious of the potential of Middle Eastern people."

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