Over the past six years Syria, once a byword for proto-Soviet state control and autarchy, has opened up its economy and implemented investment laws that allow foreign companies to set up shop. But few multinational food companies have wised up to the opportunities within an emerging market of 18 million consumers. As a result, those that have dipped a toe into the water, such as France's Bel Groupe, have been able to command large slices of the Syrian market. Paul Cochrane reports from Damascus.

From 1982 until 2000 Syria adopted a nationalisation policy, forcing foreign companies to smuggle in goods from neighbouring companies.

After the death of former President Hafez Al Assad in 2000, however, the country started a reform drive and moved towards a market economy under Assad's son, current President Bashar Assad.

A change in investment policy in 2003, Investment Law 10, allowed the Bel Groupe, which manufactures processed cheese brands Kiri and Laughing Cow, to enter the Syrian market.

In June 2005, the company invested EUR13m (US$17.1m), the largest single foreign investment in Syria's non-retail sector in the past three years, to set up a 30,000 square meter factory outside of Damascus.

The move was unusual for the Bel Groupe, said Karim Saidah, general manager of Bel in Syria, as for the past 40 years the company had converted old factories and used second-hand machines from other global operations when establishing a presence in new markets. However, Syrian law required the importation of new machines, taking an 85% slice of the total investment.

Due to surging demand and savvy marketing the investment soon paid off. "We went from 5% market share to 65% in less than 18 months. It is a success story, as we are producing more than planned," said Saidah.

Bel has simply steamed ahead against its main competitors, France's President, Lebanon's Smeds, and Boy, plus Syrian companies Habibouna, Hura and Penguin.

As a result, local companies' slice of the 150,000 tonnes a year cheese market has declined, said Saidah, to between 6-7% of the processed cheese market. Some 7,000 tonnes of this is processed cheese, valued at EUR35m a year.

To ease its way, Bel used the Joud Company, a major Syrian conglomerate that implemented a modern distribution system six years ago for Procter & Gamble and Pepsi, allowing Bel to reach 10,000 retail outlets.

Having a presence in Syria also allowed the company to meet strong local demand. And demand for products is rising across the board, particularly for Western brands, attributed to a rise in access to satellite television and the Syrian army's withdrawal from Lebanon in 2005. Beirut used to be a major shopping destination for wealthier Syrians, who are now looking to Damascus for imported products.

The construction of several shopping malls in the country is also underway, including one valued at US$500m, which is expected to create greater demand in the retail and food sectors. The French supermarket chain Carrefour is also rumoured to be interested in one of the mall schemes.

However, multinationals have not appeared to sense the shift in Syria's economy due to the political and social turmoil with neighbouring Lebanon and Iraq, and perceived instability in Syria itself.

"I told French investors recently that now is the time to come to Syria, but I have not heard any plans in the food sector or any other areas, other than the tourism or real estate sectors," said Saidah.

"Marketing is very cheap in Syria, so I have been encouraging multinationals to invest, as what will increase over time is advertising costs," he added.

Indeed, government statistics suggest that Syria's advertising sector grew 50% in the last year.

And there could be more opportunities to come: three weeks ago Syria introduced a new investment law - which includes exporting profits overseas - to attract foreign investors to help boost the country's sluggish economy and lower unemployment, which is estimated at 20%.

But other than Gulf investors, there appears to have been minimal interest.

"The Gulf countries are looking to diversify. Otherwise, there is not much [Western] foreign investment or forward looking investors, but the Chinese and others are [looking at investing in Syria]," said Roddy Drummond, deputy head of the British Embassy in Damascus.

The perceived risk of investing in Syria can pay off however, as the Bel Groupe exemplifies, with 40% growth in the cheese market over the last two years and a slated 15-20% growth over the next five years.

"Risk takers are the winners, that is why we are a success story," said Saidah.

Indeed, since Pepsi was taken off a Syrian black list in 2005 and the Joud Company started distributing Pepsi products, Joud has cornered 50% of the country's US$100m soft drinks market. Car manufacturers have also benefited from changes in import regulations, with annual growth in the sector estimated at 50%.

The presence of foreign companies is also having a positive effect on Syria through bringing about regulatory changes. Saidah said the company faced a 37% importation tax on cheddar cheese, but after meeting with government officials managed to get the tax lowered to 7%. In return, the Syrian government used Bel as a poster boy to be held up as a well-known brand that has benefited from its involvement in Syria.