Solidere's showroom on Foch Street is like a giant toyshop, furnished with scale models that would delight any child. Holding a laser pointer so that I can follow his journey through the city, David Mulville, the company's Irish corporate finance director, stands in front of a room-size maquette of the Beirut Central District as it now is, along with the seafront wall and marina already under construction.

The soulless, modern architecture shown on artists' impressions of the future downtown area in the early 1990s has been excised from images of the future city. Many Lebanese had objected to the plans, fearing Beirut would look like Jeddah or Riyadh. Now the restored banking district oozes stately confidence and money.

Scores of Syrian, Egyptian and Indian workmen armed with deafening electric stone cutters, drills and hammers are putting finishing touches on the 1910s-1920s Foch-Allenby quarter with its French and Ottoman yellow stone buildings, streets paved with basalt cobblestones retrieved from the ruins and reproductions of early 20th century French street lamps.

Water, electricity, sewage, telephone and fibre-optic cable networks have been completed throughout Solidere's original 120-hectare area. Infrastructure in an additional uncompleted 60 hectares of landfill will be finished by 2003.

Five years after the Lebanese joint stock company was created to rebuild downtown Beirut - and years before its goal has been completed - it's already being studied as a model by the World Bank.

Multi-lateral agencies working in the Balkans are asking for advice, and so is the government of Armenia. Solidere's exploitation of private enterprise for war reconstruction is an ambitious undertaking unmatched anywhere in the world.

Urban development is a fashionable concept everywhere at the moment, but outside Lebanon it has automatically fallen largely to the public sector. The Dublin and London Docklands projects, Paris' La Defense and Brasilia were all partly financed by taxpayers. Now Solidere is showing for the first time that a luxurious, state-of-the-art city centre can be planned, built and sold without government spending.

This is how it happened.

Downtown Beirut was the main front line during the 1975-1991 Lebanese civil war. Sixteen years of artillery and gun battles whittled its elegant Ottoman and French mandate facades into lace.

Grass grew in roofless churches and mosques. The stolid bank buildings of prosperous, independent Lebanon were disfigured by gaping shell holes. Snakes, rats, wild dogs, snipers and drugged militiamen haunted the blood and sewage-soaked ruins.

In 1982, an expatriate Lebanese billionaire and philanthropist named Rafiq Hariri believed prematurely that the civil war had ended. He began renovating apartment blocks in the downtown district. The Israeli invasion - in which 17,000 Lebanese and Palestinians were killed - stopped the project.

Mr Hariri returned from Saudi Arabia in 1992 as Lebanon's prime minister. He was - rightly - sceptical of international pledges of reconstruction aid and invented Solidere to ensure that the capital's centre would not become a permanent wasteland.

Because Mr Hariri dominated post-war political and business life in Lebanon, he was able to push through special legislation establishing the company as a flagship for reconstruction in 1994.

First, 120 hectares of war-ravaged land in the Beirut Central District were surveyed. In exchange for their property rights - and sometimes against their wishes - 127,000 owners and tenants were given 50 per cent of Solidere's equity. To repay Solidere for installing all of the infrastructure in the downtown area, the government gave the company an additional 60 hectares of prime seafront property, to be built on landfill at Solidere's expense.

The other 50 per cent of the company was bought for $650 million by Lebanese and Arab investors, including Mr Hariri, who initially purchased 6.4 per cent and now owns 7.04 per cent of the company.

David Mulville participated in the project from the beginning.

After studying at Blackrock College and earning a law degree at UCD, Mr Mulville worked for the Irish Stock Exchange. He was recruited by Solidere through his business contacts in the Gulf, joining the company in 1994 at the age of 25. Today, at 31, the young man from Dundrum is the corporate finance director for a company with $1.5 billion (€1.47 billion) in equity and fixed assets valued at more than $4 billion.

If Solidere was a visionary project, it was also risky. In 1996, the company became the first Arab business to be floated on the London stock exchange.

"It was good for Lebanon because it focused interest on the country," Mr Mulville says. "The problem is that there are not many people from outside who want to invest in the Middle East. You are battling against misconceptions about the country, and the region is not one of fast growth."

Mr Mulville's legal training served him well; he resolved a contradiction between British and Lebanese corporate law by running shares through the French investment bank Paribas. (Lebanese law changed last year, making the intermediary step unnecessary.)

Solidere shares sold for $11.50 when they were floated in London; today they have dropped to $9.50. Yet in 1997, Solidere stock reached a high of $18.50 per share, raising the company's market value to $2.6 billion. The mercurial performance of Solidere shares reflects the trend away from emerging markets since late 1997, Mr Mulville says, but it is also a side effect of the Middle East "peace process" - or lack thereof - and the political career of Mr Hariri.

In April 1996, Israel launched three weeks of air strikes on Lebanon in which nearly 200 Lebanese were killed and much of the country's infrastructure was destroyed. An Israeli air force general told an Israeli newspaper that he would smash Mr Hariri's dreams of rebuilding Lebanon.

"It set us back a lot," Mr Mulville admits. "Not specifically Solidere, but the economy in general - and we are very linked with the economy. Because we are working with regional and international investors, perception counts a lot. The one thing investors hate is political risk."

When Ehud Barak beat Benyamin Netanyahu in Israel's general election, Solidere's shares jumped 20 per cent, from $8 to $10.50. That gain was eroded by Mr Netanyahu's parting shot - the June 24th bombardment of Lebanese bridges, highways and power plants.

The other question that long hovered over Solidere was whether it - and the Lebanese economy - could survive the departure of Rafiq Hariri from office. Mr Hariri left power last November over a disagreement with the newly-elected Lebanese President, Gen Emile Lahoud.

The Lebanese economy went into a state of near paralysis. Sales by Solidere of downtown property dropped and its share price fell sharply. "The whole business community shut down, waiting to see the new government's budget," Mr Mulville says. "We expect between zero and 2 per cent economic growth this year; between 1994 and 1998, it averaged 5.5 per cent a year."

The new government has declared war on corruption, raised taxes and enacted austerity measures to tackle Lebanon's $18 billion national debt. It has cancelled $50 million worth of contracts with Solidere to build new ministries of the interior and finance in the Beirut Central District. Now that the new government has made its long-term plans known, uncertainty has passed and the economy is beginning to stir, albeit slowly.

Lebanon is divided between conservative economists and supporters of Mr Hariri's borrow-and-build strategy. "Rafiq Hariri believed you had to rehabilitate the country physically before you could achieve economic growth, that it would have a multiplier effect," Mr Mulville explains.

"Five or 10 years ago, Ireland too was using most of its revenue to service debt, and look at Ireland today. Because of what Hariri did, Lebanon now has a modern airport and roads, a shining downtown. It's better to have that and a debt that can be paid off relatively quickly."

Mr Mulville stresses that Solidere is a private company which received no government funding. "It's one big BOT [Buy, Operate and Transfer] scheme. If anything, we've freed up other resources for reconstruction," he adds. Salah Hassanieh, the deputy general manager of the Allied Business Bank, agrees. "If the government had taken responsibility for rebuilding downtown," he says, "Lebanon's debt would be twice what it is, and they wouldn't have done a good job."

Despite the battering that Solidere's shares have taken from Israeli bombardments and the vagaries of Lebanese politics, Mr Mulville believes the company's prospects are good.

"Apart from the value of share prices, the physical changes here are remarkable," he says. "Officials from all over the world are applauding our logo: `We are developing the finest city centre in the Middle East'. We're creating what we believe to be an unparalleled urban environment. That will allow Beirut to vie for its old position as financial centre of the region. Without the investment that has taken place, it could not do so. The value of the land has increased because we've invested $800 million; the land itself - the assets of the company - is worth more than $4 billion, which is not reflected in the share price."

Mr Hassanieh says the government's use of treasury bills to shore up the Lebanese pound has diverted funds from Solidere and the Lebanese stock market in general, because T-bills were a more lucrative investment for rich Gulf Arabs. The central bank still offers 15 to 16 per cent interest on T-bills; the interest rate climbed as high as 40 per cent in the 1990s - on a currency that appreciated from 1,800 Lebanese pounds to 1,500 Lebanese pounds to the dollar.

But Mr Hassanieh, like most of the Lebanese business community, shares Mr Mulville's optimistic assessment. "For the long run, it is a good investment," the banker says. "At the moment we are still regarded as a risk country, and the Lebanese stock market is not developed. But the real value of the shares if you liquidated the company would be $18 or $20. That's a conservative estimate based on the value of the land and not taking account of the potential earnings of the project.

"It is in the centre of the capital, where everyone will want to have their headquarters. It has high-tech infrastructure - and it is beautiful."

Before work could start, archaeologists were allowed to excavate much of the district. Their demands were a nuisance to Solidere, but the excavations paid off. Hellenistic, Phoenician, Canaanite, Crusader and Ottoman vestiges will be the focus of an archaeological museum strategically located opposite the cruise line terminal.

There are newly-landscaped Roman baths behind Bank Street, and Roman columns next to the Maronite Cathedral. The 1517 Mamluk shrine of Ibn Iraq Al-Dimashqi - slated for destruction - had to be preserved after it became a place of Shiite Muslim pilgrimage. The only memorial to the 1975-1990 civil war will be a "garden of forgiveness" set between the Maronite cathedral, Greek Catholic church and a mosque.

The presence of 17,000 squatters in the Beirut Central District also slowed the project. Solidere paid $250 million to entice them to leave the downtown ruins. That move is now criticised by the new Lebanese government, which claims it established an unfortunate, prohibitively costly precedent for the rest of the country.

In exchange for Solidere shares, 1,630 properties were confiscated in 1994. "Of the 800 buildings still standing, 295 were retained," Mr Mulville says. "Thirty of those are mosques, churches and government buildings. The other 265 had been privately owned and were `recuperable properties' whose original owners were given the option of refurbishing the property themselves, according to Solidere's criteria. Some 140 properties were recuperated by their owners."

Solidere's master plan shows 4.7 million square metres of real estate in the Beirut Central District, of which 700,000 square metres belong to the government or have been recuperated. "That leaves us with 4 million square metres We're developing 300,000 square metres ourselves, and we have sold 450,000 square metres so we've got a big land bank left," Mr Mulville says.

The goal is a city centre that will be 40 per cent residential, 40 per cent offices and 20 per cent commercial. All commercial space in the restored Foch-Allenby quarter has been snapped up, and all of the shops in the still unbuilt gold souk are taken.

Among the big private prestige projects already under way are the headquarters for Banque Audi. The Saudi-Lebanese Prince Walid Bin Talal and his Saudi business partner Khalid Al-Saef have purchased $75 million worth of property on which they intend to build a Four Seasons Hotel and a waterfront "Marina Towers" apartment building at a cost of $250 million.

Most of Solidere's contracts have been awarded to Lebanese firms. One exception is the $53 million, 4 1/2-year contract awarded in April to the US firm Radian to sort and process the "Normandy dump" - 18 hectares of wartime rubble dumped in Beirut bay during and after the war. Until recently, Washington banned its citizens from travelling to Lebanon. As a result, Italy and France have seized most postwar Lebanese markets.

The French construction company Bouygues should complete the downtown sea wall and an adjacent marina and yacht club with slips for 500 boats by April 2000. Divers hired to survey the site found 1,500 unexploded artillery shells. Because the coast is on the flank of the Mount Lebanon range, the seabed drops quickly to 30 metres in depth. To protect the new city centre from tidal waves, Solidere's engineers devised a unique civil engineering project which will raise the sea floor along central Beirut to only 5 metres, by laying thousands of large cement "acropodes" similar in shape to the chicanes used in military barricades.

Vertical slats in the sea wall, composed of giant, outwardly-curving concrete "caissons", break the thrust of the Mediterranean waves by allowing sea water to rush under the Corniche highway.

Meanwhile, Mr Mulville - who came to Beirut five years ago expecting to stay for one year - has found what foreign visitors have learned since the time of the Crusaders: that Lebanon gets under your skin, becomes a way of life. The Irishman is so taken with Solidere's restoration of the Saifi residential quarter, with its tile floors, wrought iron balconies and traditional red-roofed buildings, that he has leased a flat for himself.

And he has also staked a claim on a cafe/wine bar in Beyhoun Street in the FochAllenby quarter near his office; "I thought it would be a good idea to diversify," he jokes. The cafe will open in September, and he promises to sell Guinness, but only after I chide him. "It's tailored to local tastes," he says. "We'll sell Cuban cigars."