Alan George reports from Damascus.

They are later in arriving than most, and they are only pilot projects; but the first weeks of the new millennium finally saw Syria's first mobile phone systems become operational.

Three pilot schemes are being established in the two biggest cities, Damascus and Aleppo. The transmission towers are completed and work is under way on the base stations.

Reflecting Syria's perennial cash squeeze, the global standard for mobiles (GSM) schemes are being developed in a novel fashion. Three companies - Germany's Siemens, Sweden's Ericsson and Lebanon's Investcom - are installing the pilot projects free of charge. Ericsson's scheme, in Damascus, will serve 30,000 subscribers, while the other two - for which Siemens is supplying the equipment - will each serve 15,000 subscribers.

Siemens and Ericsson have played major roles in the development of Syria's telecommunications system for some years. Investcom is a partner in France Telecom Mobile Liban, one of Lebanon's two GSM operators. When the pilot projects were launched, in mid-1999, Siemens was working in partnership with Egypt's Orascom Telecom, a partner in one of Egypt's two GSM companies which recently acquired a stake in Jordan Mobile Telephone Services (Fastlink).

In late 1999 Orascom withdrew from the project, at a time when it was disclosed that Siemens was reviewing its approach after the state-owned Syrian Telecommunications Establishment (STE) had expressed reservations about its original arrangement. The German company favoured working with a partner as a means of sharing costs.

While the companies are working for free, all revenues from the systems for one year will go to the STE. The connection fee for private sector subscribers has been set at $1,200 and STE Chairman Makram Obeid says that revenues are expected to total $35 million.

Probably towards the end of 2000, STE will stage a 'beauty contest' between the three companies. The prize will be a contract for a wider GSM system which will serve 200,000 subscribers in the first year and over one million within five years. For the companies, this is the motive for working free on the pilot schemes.

As an STE official put it in mid-1999: "We have told the companies that if we like their equipment, we will buy more of it. If not, they will be entitled to dismantle it after a year and take it away."

It has yet to be decided whether the full, country-wide GSM system will be operated by STE or whether international operators will be able to bid for licences under a build-operate-transfer (BOT) arrangement.

Fully-fledged GSM systems have been operational for some years in most Middle Eastern states, so why has Syria dragged its feet? Speaking earlier this year, STE Chairman Makram Obeid explained the delay in terms of developmental priorities: "We have allocated enormous resources for new projects, reflecting the big demand and still we have a telephone waiting list of two million". Against that background, STE considered the establishment of a mobile system to be a secondary priority.

Syria, however, is a state whose government is, to put it at its most delicate, security conscious. Western observers in Damascus are adamant that a key underlying reason for the delay has been the reluctance of the authorities to countenance a communications system which cannot easily be monitored.

Similar official concerns are responsible for the absence of other services. Until 1995, fax machines were banned and a ban on the import of computer modems was lifted only in June 1998. The STE introduced an internet service in April 1998. However, for its first year it could be used only by government departments and state-owned enterprises. Now it is more widely available but access has proved to be intermittent, for reasons understood to be connected with 'security' - a word which can have wide and fluctuating definitions in Syria.

In a largely state-owned economy dogged by excessive bureaucracy and over-manning, Syria's telecommunications sector is one of the bright spots. In the last decade, and with the help of loans from the Kuwait-based Arab Fund for Social and Economic Development (KFAED) and the Abu Dhabi Development Fund, the STE has overseen the installation of modern digital systems throughout the country and work is still pressing ahead.

A project is currently under way for the installation of 1.65 million lines, to bring the national total to 3.4 million by 2002. The scheme is costing $390 million in hard currency plus 10 billion Syrian pounds (about $200 million) in local currency.

The biggest contract in the six-contract programme, valued at $120 million and for one million new lines in 62 exchanges, was won by Ericsson in June 1998. Siemens won a $41 million contract to supply 720,000 lines last spring. This work involves a 400,000-circuit expansion of the capacity of switching systems supplied by Siemens under an earlier contract, and the supply of 320,000 trunk line interconnections.

Switching equipment for 250,000 new lines is being supplied by a joint venture of South Korea's Samsung Corporation and a local state-owned concern, Syrionics.

Samsung Electronics is supplying rural fibre optic systems under a $8.8 million contract won in 1998 while Germany's Bosch is supplying new intercity microwave links and new microwave links between rural areas and cities.

The sixth contract, won by Ericsson in late 1998 and valued at $15.1 million, is for intercity fibre optic links.

STE's target is a national total of over four million fixed lines by 2004, which will bring the country's teledensity to 20 telephones per 100 inhabitants compared to the early 1999 ratio of 10 per 100 inhabitants.