GREETINGS FROM the "axis of evil", where I am working on the planned extension of the Arab Gas Pipeline. This multi-billion dollar project will stretch from Egypt, 750 miles across this troubled region, and may one day form part of your gas supply. Already it extends through Jordan and Syria, where it is being extended to Lebanon, and from there - if the economics stack up - it will continue to Turkey, gateway to Europe.

As well as spending time in Lebanon, I have been advising the government in Damascus, capital of Syria - one of the countries famously defamed by President George W Bush in a 2002 speech. But how evil is this country? More to the point, what opportunities does it have to offer Scottish businesses?

Mackay Consultants now has two joint-venture offices in the Middle East - in Saudi Arabia and in Ras-al-Khaimah in the United Arab Emirates. They account for nearly 80% of our turnover and about 60% of our profits. Virtually all our work is oil-related and stems from the work we did in Aberdeen and the North Sea in the 1980s and 1990s.

The Middle East has never been an easy region to work in, Saudi in particular, but it is becoming steadily easier. I have been lucky in finding excellent joint-venture partners after one or two bad choices in the early years.

I expect to spend about half my time in the region over the next few years because the economics consultancy market here is growing at a much faster rate than in Scotland.

To my surprise, Syrians betray no indication of anti-Western feelings, and everyone I meet seems genuinely interested in what I am doing in Damascus. I have had meetings with many officials and businessmen, and the reaction was similar - no anti-Western statements but some personal criticisms of our glorious leaders. Syria is a developing economy and income levels average just £1250 per person per year. The cost of living is also very low, so in purchasing-parity terms the figure is around three or four times higher.

Low incomes are obvious from the standard of accommodation in Damascus, and the vintage of the cars on the streets. I am told that there is a widening disparity of income levels but saw few signs of that. There was little evidence of the bling now seen in Moscow and many Eastern European cities.

Syria is a command economy but not a communist one. It is dominated by the public sector and the private sector is very small, even by Scottish standards. Most industries are owned and run by state bodies.

The World Economic Forum's Competitiveness Index ranks Syria 84th of 128 countries surveyed, and 12th of the 13 Arab countries. Its weaknesses are identified as market efficiency (rank 114), technological readiness (109), innovation (99) and higher education and training (96). It ranks better for primary education and health (45) and the macroeconomy (61).

Some reforms and privatisations are under way but progress seems to be slow. When the US-educated President Bashar al-Assad succeeded his father in 2000 at the age of 34 there were expectations of major changes but these have not happened. There has been some liberalisation in banking and the attraction of foreign investment in the oil and gas industry, but few noticeable changes elsewhere.

The economy is very dependent on a few sectors, notably agriculture (about 25% of GDP) and oil and gas (30%). The manufacturing sector is very small and the service sector underdeveloped, not surprisingly given the low incomes. Agriculture provides about a third of total employment and the public sector a similar proportion.

Syria is a net exporter of oil but production has been declining and consumption increasing, meaning that the country may become a net importer during the next decade. There is also gas production and a strong programme to convert electricity generating stations to use gas rather than oil. That will require gas imports from Egypt through the Arab Gas Pipeline, the project I am working on.

Because of declining production there are opportunities for Scottish-based oil service companies with expertise from the mature fields in the North Sea. Shell, Total and PetroCanada have joint ventures with state bodies. I experienced no opposition to UK firms working in the country, whatever political differences remain.

Government revenues from oil exports have increased recently because of the massive rises in world oil prices and the finances are currently much better than expected. Bashar announced a few days ago a 25% rise in the salaries of public workers, no doubt intended to reduce concerns about rising food prices. The Middle East is far more diverse than it is perceived from Europe, and Syria is one of the poorest parts. Where high oil prices have generated fabulous wealth in Saudi Arabia, the United Arab Emirates and Qatar, there is a very high level of construction and other activity. But if you think Dubai is typical of the region, think again.

Even some of the oil-rich countries are still relatively undeveloped. Iran is the best example of this group; another is the somewhat special case of Iraq.

A third group is made up of countries with some oil and gas production but only on a scale close to domestic consumption and therefore without massive exports earnings. Syria and Egypt are in this group.

Finally, there are poor countries with little or no gas reserve: Jordan, Lebanon and the Palestine Territories. Unsurprisingly these countries are where troubles accumulate.

Egypt exports gas through the Arab Gas Pipeline to Jordan and Syria. I am working on a feasibility study looking at extending it north to Turkey from where it would link to European gas markets. There are many complications, not least gas prices which like oil prices have soared recently. Consumers in Syria and Jordan will find it very difficult to pay world market prices for the gas but Egypt has the option of exporting liquefied natural gas (LNG) to Western Europe and the US.

There are also doubts that Egypt has sufficient gas reserves to increase exports through the pipeline. An obvious option is to build a link pipeline from Iraq, which undoubtedly has plenty of gas, but nobody expects that to happen in the near future.

The main issues in Syria are clearly political rather than economic. President Bush had little justification for the "axis of evil" label but other countries in the Middle East have real concerns about their political stability. Syria has maintained considerable control in the Lebanon, but this appears to be diminishing since the assassination of its former prime minister, widely blamed on the Syrian security forces. Because of the problems, the parliament in Lebanon has not met in 18 months and there has been no president during that period.

The Syrians support Hezbollah, financially and politically. I visited the latter's headquarters on my way to Beirut, a few miles from historic ruins at Anjar. My driver, who I had no doubt was a member of the organisation, took me for a cup of coffee with fellow members of the party of God.

Hezbollah took over much of Beirut last week but the political situation has been much quieter in recent days. They are undoubtedly big players in the conflict in Palestine and also allegedly in Iraq.

In Damascus I had no feeling of a country at war. There is a large military presence, not on the streets but in bases around the city. However, my experience is that a large army is sometimes little more than an easy way of providing jobs. My work involves identifying gas supplies for Turkey and the European Union. A look at a map will show Iraq and Iran as the obvious sources in a less volatile future. I see no "evil" in Syria's attempts to improve an economy beset by years of mismangement. There are big differences to be resolved but we are far more likely to achieve that through business dealings and diplomacy than belligerent rhetoric.

ACCORDING to Scottish Enterprise's Global Connections Survey (based on voluntary responses from companies), Scottish Development International currently supports, or has plans to support 31 Scottish companies in the Middle East outside of the oil rich states.

These include: SYRIA Helix RDS (Aberdeen) -oil field development.

Cardonald College - textiles industry training.

MOROCCO James Watt College - management training.

TUNISIA Flowline Specialists Ltd - specialist pipeline services.

EGYPT Scottish Ambulance Service - paramedic training.

Kyle Engineering Ltd, Elgin (specialist agricultural equipment).

Briggs Marine - rapid response to oil field spillage.

in the middle about the writer TONY Mackay, a former Aberdeen University economist, was an adviser to BP and other energy firms during the early days of the North Sea oil boom. He set up MacKay Consultants in 1981 and has built up a worldwide energy economics consultancy practice. From its base in Inverness, the company advises both public and private sector clients. The firm's widely quoted monthly report on the Scottish economy review is distributed to 400 businesses and other bodies. Mackay is currently working as a consultant on an EU-funded project to support the energy department of the government of Bosnia and Herzegovina.