The eyes laughed again, her hands holding out a small pile of semi-opaque, multi-purpose pebbles. An incense burner and a cup of aromatic "khawa" smoked on the counter beside her. The air was impregnated with the sweet smell of an ancient past.

Laila's job is supplying luxury incenses and perfumes as well as essential oils. Wearing her black "abaya" gown, she works every day at Abu Mohd (Shop No 2) in the Al-Husu market in the Al Hafa district of Salalah, on the southernmost tip of the Sultanate of Oman. Like nearly everyone else in the market, Laila stocks oblong tears.

Tears are very precious and necessary commodities in the Arabian peninsula.

The bustling ancient market in the narrow sandy alleys is full of "well-priced" gold and silver, "musr" turbans, "kummah" caps, "naal" sandals, copper coffee pots, ceremonial "khanjar" daggers and tailors' shops offering fittings for gentlemen's robes, ladies' "thobs" and traditional velvet Dhofari dishdasha dresses. But the shops with the baskets, jars and polythene bags of tears are the most common.

Tears are good for you and good for business. Frankincense tears are on everyone's shopping list, tourists and tourists. Although there is a long tradition of fishing and dhow-building the Dhofar region - 90 minutes' flying time and a 1 000km 12-hour drive from the capital Muscat - has been known for centuries for the production of frankincense.

The Frankincense Trail is as famous and as ancient as the Silk Route. The 30km long, 20km wide coastal belt and the mountain range not far from the Yemeni border receives the "Khareef" southwest monsoon winds from June to September. The mists blanket the region, creating perfect conditions for growing frankincense trees. For four months Dhofar becomes the coldest place in the Arabic world. Before becoming the greenest.

"You will be amazed at the difference in landscape within a matter of miles," explained my guide Naser Sulaiman Al-Mani as we drove past roadside stalls selling papayas, bananas and other fresh tropical fruit. Coconut palms swayed above us. Leaving the outside lane to Chryslers and Chevrolets, camels formed a contraflow on the ring road before the tarmac petered out into a dirt track and we were in the arid foothills, on our way to Wadi Dawqah, one of the world's oldest frankincense fields.

Along with nearby Hasik, Wadi Adawnib, Wadi Andhur, Ulyun, and Thumrayt, Wadi Dawqah was an important stop in the caravan routes and as far back as the fourth century BC, was the first place in Oman to produce frankincense for a global market. Frankincense has been central to many religious practises for many centuries. It was used by King Solomon, Emperor Nero and Tutankhaman.

It was Oman's first oil. It made the country rich and famous around the world.

Such history has earned the frankincense valley of Wadi Dawqah a place on Unesco's World Heritage List. As we jolted and juddered through the dust and spindly, stunted trees Naser explained that it takes 14 months for a five-foot frankincense tree - genus Boswellia - to become mature. A good tree can produce up to 10kg of frankincense for up to 30 years.

The sun beat down mercilessly on us. We looked up at the frankincense trees as Naser talked them up. He is a true frankincense fan.

"They don't look much. You wouldn't know it to look at them, but these insignificant-looking trees are an integral part of my country's culture and history. An essential part of who I am! They are ugly and beautiful at the same time!"

Thirty-six years old, Naser was born in Tanzania which was ruled by a branch of the Omani royal family until 1964. He moved to Oman in 1995 and worked in Muscat before moving south. He became fascinated by frankincense after reading about the subject and wanted to be closer to its source.

He picked up a rock from the road. As he used it to expertly saw into the bark of a tree he continued with his lesson. "The Arabs call African frankincense 'asli' and their own 'luban'. Hebrews refer to incense as 'lebonah' or 'ketoreth'. The Three Wise Men, of course, brought frankincense along with myrrh, which is another tree resin. The Romans used frankincense and called it 'mascula thura'."

A thin white liquid bubbled from the tree. "It is approved. We can all help ourselves and tap any tree, any time," he explained, cupping the liquid in his hands. "It is a public resource."

There are various types of frankincense. From "Hougari" or "Hojary Superior" to "Nejdi" or "Nagdi". The purest is colourless or with a slight green tinge. The best (silver or male) is white-silver and brittle. The cheapest is brownish-yellow. They all have a balsamic odour and a bitter aromatic taste. Once it has crystallised, frankincense burns easily and slowly with a bright white flame.

The most sought-after is breast-shaped like the union of two tears. Prices range from £1,50 to £70 (about R20 to R1 000) per kilo. Frankincense or Olibanum trees are also found in central India and the Coromandel coast as well as in Ethiopia. But the "Boswellia carterii" or "sacra" only grows in Somalia in east Africa, around Hadramaut in Yemen and in Dhofar. It is considered to produce the best frankincense. It is bought to fumigate houses and clothes.

We drove back into Salihah. The habit of perfuming your house with "Bukhoor" is a way of Arab life. Passing around an incense burner or "Mabkhara" is considered a mark of respect and hospitality.

The frankincense is seen as a status symbol, and in Oman, it's also chewed to relieve indigestion and freshen the mouth. In ancient times the large globules were packed into goat and sheepskin carriers and exported from the former capital Mirbat and Salalah to Egypt, India and China. A frankincense museum will soon open on the site of the historic harbour at Salalah.

But Oman is not all about frankincense. In Muscat the muezzins compete through megaphones from their minarets with charter jets and construction work. Paintings of the sultan stand beside corporate logos. Souks compete with spas and wellness centres. Date cultivation has given way to investment cultivation.

Traditional arts and crafts are being overwhelmed by the modern sciences of engineering, PR and catering. The first six-star hotel, the Shangri-La All Bissah, has opened and there are plans for a Greg Norman golf course.

The second largest country in the Middle East, Oman is thought to be the ancient civilisation of Majan. The history of the sultanate can be traced back to 12000BC. In the 3rd century, Oman had the world's most powerful naval fleet. The Portuguese left in 1650. Imam Ahmed bin Said, founder of the present dynasty, expelled the Persians in 1741. After 1861 ties were established with Britain. In 1970 HM Sultan Quaboos bin Said claimed the throne. Modern Oman is only 36 years old and changing rapidly, desiring to be the new United Arab Emirates, and its capital, Muscat, the new Dubai.

But Salalah is ancient Oman - a fast-developing country's last link to an illustrious past. "Dhofar is a unique and fascinating place," said Naser. "People come from Muscat to ldance in the streets. And only two hours over the mountains from the Empty Quarter, the Rub al Khali or desert."

South Oman is still a place of ancient cities and old ways of life. In the "Jebel" foothills is the Tomb of Job (Nabi Ayoub), mentioned in the Qur'an and the Bible. The Queen of Sheba's palace was in Khor Ruri near Samhuram, which was a famous frankincense port. The current sultan was born in Salalah and has his summer residence there. The Dhofar region is also the final resting place of Nabi Imran, the father of the Virgin Mary, and Emran, the father of Moses.

There's lots more to see around Salalah. Like the world's second largest blowhole at Tawi Attir, the 9th century ancient capital of Mirbat and the botanic gardens at Ayn Razat. One of the most curious sights is tribesmen selling guns outside a bank in town. The guns are bought by collectors and the salesmen display their wares outside the bank so they can get change easily!

You could take a day drive to the Arabian Oryx sanctuary on the Jiddat Al-Harasis plateau, home to one of only two herds of wild free-ranging oryx as well as Nubian ibex, Arabian wolves, honey badgers and Arabian gazelle.

Naser said he had to leave. His baby lion was not well, he said. (Turned out his two-year-old son was called Laith - baby lion - and was not very well!)

"Southern Oman is natural Oman. Old Oman," were his parting words.

Muscat may be changing itself. But Salalah will never change. Frankincense will always be a reminder of the past. In the desert valleys you can see the past. In the souks of Salalah you can see the present and the future. Once Omani ladies like Laila kohled their eyes using burnt frankincense.