THERE'S a small arts centre in the heart of Edinburgh's Old Town. It shares a box office with John Knox's House, just one tourist stop away from the Museum of Childhood, and you could be forgiven for not knowing it's there. After all, there must be New Town living rooms bigger than its basement theatre and, as far as I know, it's never employed a dedicated press officer. Yet the Netherbow Theatre has a track record quite out of proportion to either its scale or its profile.

Here it was that John Mitchell's Oxygen House would stage curious lunchtime shows and atmospheric evening productions at the turn of the decade. Here that Fifth Estate made its name with neg-lected literary dramas in the early 1990s. Here that the dying art of oral story-telling was rescued, revived, and turned into a boom industry across Scotland. Here that the Puppet and Animation Festival flourished into an annual multi-venue event. Here that The Herald spotted Wee Stories Theatre Company performing Labyrinth in the 1999 Fringe, and promptly blessed it with an Angel award. Now a promising young company called the Scottish Actors' Initiative is using this Royal Mile venue as a spiritual home from which to launch itself on the world.

As I write this, I can feel

Donald Smith, the centre's long-standing director, cringing at the attention. It's not that he is unduly modest or even shy, it's just that his priority is not the greater glory of the Netherbow, but the facilitation of artistic enterprise. His attitude has a lot in common with that of Glasgow's Citizens' Theatre, a place that focuses on the stage not the fanfare.

''I'm very leery about making statements about the Netherbow,'' says Smith. ''We've consistently avoided that idea. The arts are always being collapsed into public relations. Particularly theatre. The be-all and end-all is to get out a good message about your institution to attract money to perpetuate your institution. So what? You could call me a romantic, but there's a collective cultural economy that goes on regardless of this or that institution. It's more important to nurture that than it is to say, 'We have this wonderful programme and this wonderful institution'. In fact, my instincts are always the opposite, that when a thing gets built up to a certain point, we should have the courage to rip it down. My interest is to nurture new writers, support new companies, see that talent develop, not to hug it to my institution, because I know that it will play itself out in different ways.''

It's this approach that makes Smith sympathetic to a venture going on across town this week at Theatre Workshop. Unfunded is a mini-season of performances and readings by companies with professional aspirations, but no financial backing. The idea is to give a leg-up to six fledgling companies, letting promoters know they're there, and offering a package of Arts Council and business seminars to pass on professional advice. It's the kind of seedling development that the Netherbow likes to do and, by coincidence, Smith is an inadvertent benefic-iary of Unfunded himself. The aforementioned Scottish Actors' Initiative is one of the companies selected by Theatre Workshop to give a reading. The play it has chosen is Farewell, Miss Julie Logan, an adaptation of J M Barrie's final novel by one Donald Smith.

''There's always been this odd thing as if J M Barrie had nothing to do with Scottish theatre,'' says Smith, who is convinced that

nearly 100 years after Peter Pan, Scotland is on the cusp of a Barrie revival. ''Barrie's stage work was very tailored to the Edwardian commercial theatre. He had an absolute grasp of the theatre conditions of his time and what he was required to deliver. So in his stage work he's writing about things he's interested in, but often at one or two removes. There's a surface veneer where he uses sentiment, emotion, and a bit of glitter to please. He knew he had to please to make money. But in Farewell, Miss Julie Logan it's as if he takes the gloves off. He returns to his own Scottish background in the Angus glens and writes a ghost story, which also seems to me to be a nakedly powerful piece of dramatic writing, but written as a

novella. I thought it'd be inter-

esting to translate that back into theatre terms.''

After the Unfunded reading, the play will go into rehearsal for a trial production at the Netherbow with a view to setting up a major Scottish tour this time next year. It's rare to find a young company with such long-term vision. Before that, though, the Netherbow will be flickering into life as the hub of this year's Storytelling Festival, the theme of which is light and dark, with an implicit link to festivals of light around the world. Festival director Joanna Bremner has brought together tellers of tales from Scotland, India, Scandinavia, and elsewhere for two weeks of stories for young and old.

''There's a lot of ground to cover, and a lot of it depends on the theme that we choose and the performers themselves,'' says Bremner, whose programme extends to a run of films based on the Orpheus myth at Edinburgh's Filmhouse. ''There's a fair old number of story-tellers now in Scotland. The directory has gone up from 33 people to 46, and it was 19 before that.''

Smith agrees. ''A really good story-teller is not a casual discovery,'' he says. ''It is a very demanding art form to do well. Most story-tellers have more than one string to their bow, but there's now a significant pool of people whose unifying thread is their story-telling. In the 10 years that we've been running the festival, it has gained increasing recognition as an art form. The educational value of communicating by story-telling is now very widely recognised. Story-telling is now the main mode at getting out there for Edinburgh's library service.''

True to form, Smith refuses to use the success of the festival as an excuse for building an empire at the Netherbow. ''The growth comes from multiplication of local activity,'' he says. ''We don't get bigger at the centre.''

n Unfunded, Theatre

Workshop, Edinburgh,

Thursday-Saturday including a reading of Farewell, Miss Julie Logan on Saturday; full

production at Netherbow

Theatre, November 15-20; Scottish International

Storytelling Festival: Festival of Lights, various venues in

Edinburgh, East Lothian,

Midlothian, and Fife from

Friday until November 12.