A world away from haggling in smoky rooms of the bazaar, traders gathering for a fair at a gleaming exhibition hall on Iran's southern resort island of Kish grumbled at the hard economic reality of their business.

"We are experiencing an unhealthy competition in the world markets for our handmade carpets," said the chairman of National Carpet Centre of Iran, Morteza Faraji.

"Countries like India, Pakistan and China can produce carpets cheaper than us due to their special labour laws," he explained.

Iran's share of the world export market has been whittled down 480 million dollars in 2006 from 522 million in 2001, giving it a 40 percent share.

The romance of the handmade Persian carpet remains undisputed, bringing a whiff of mystical oriental culture into affluent homes in the United States and Europe.

Iranian handmade carpets, woven mostly by women, use naturally coloured wool fibres. The most expensive items, which can retail for hundreds of thousands of dollars, are made with silk fibres which lend them a shiny look.

Meticulously woven by hand, a genuine Persian carpet consists of millions of little knots carefully juxtaposed. It is said to keep in its heart the traditional songs sung by the weavers -- giving it a magical touch.