THE recently published Country Forecast on Pakistan by the Economist Intelligence Unit reads that Pakistans is an economy that is overtly reliant on textile exports. The textile sector, however, has been performing badly and the wide range of domestic factors impeding its revival, including continued severe energy shortages and higher utility costs, combined with a collapse in demand for Pakistani exports, mean that exports of textile goods and services (on a national accounts basis) from Pakistan are forecasted to contract by about 10% in 2009. Remember the installed capacity in the Pakistani textile sector is mainly dependent for its functioning on export orders coming in mainly from the US and EU zones, and any recessionary trend in these markets (like the one being witnessed at present) can have serious negative implications, which in effect can lead to industry closures at home. Combine this with our own internal issues confronting this industry like higher interest, energy and labour rates as compared to our natural competitors, worsening law and order situation at home, deteriorating country perception abroad and an untimely withdrawal of previously announced support measures - the equation adds up to a perfect recipe for disaster. To facilitate the textile industry, the previous government had introduced a support scheme on FOB (Free on Board) values, 6% R&D (Research and Development) support to garments and made-ups (both on knits and woven), 3% on the export of dyed/printed & white goods plus white home textiles and 5% on dyed/printed home textiles. The scheme has now been discontinued (from June 30, 2008), ironically when it was needed most by the industry. The R&D facilitation by no means was a huge burden on the national exchequer and actually provided the industry with the much-needed stimulus to remain competitive in the international arena. Exporters complain that amounts prior to the discontinuation date also still remain unpaid by the government, something that is causing them serious liquidity shortfalls since the exporters who sold their goods after accounting for the in place R&D inflows, in effect have not been able to see them in their cash flows. This, they allege, is happening because the funds originally allocated for textile exports are instead being diverted to the BISP (Benazir Income Support Fund). In their view such a diversion does not result in any sort of net national gain. In their opinion it is rather irrational to deny support to an industry that caters to a far broader employment base than what can possibly be covered by the BISP. Further, to provide benefit to only 3.50 million families out of a population of 170 million at the cost of an industry that caters to long-term employment needs is in fact foolhardy. The government of course on the other hand denies this to be the case. To help the national industry overcome its present difficulties, apparently the Ministry of Textile is now working on a new textile policy that will support exports by way of establishing an Investment Support Fund (ISF) for investing in specialized textile machines and will also allow duty drawback on exports of value added textile products in an altered mechanism. Further, a Textile Skill Development Board has been formed under the auspices of the Textile Ministry that will formally launch the SMOT (Stitching Machine Operator Training) Scheme for the first time in Pakistan. In addition, dedicated Garment Cities are being set up in Karachi, Lahore and Faisalabad at the cost of nearly Rs 500 million on each facility. All positive moves, but the fact remains that to see a recovering trend in Pakistan it will now require time and sustained plus consistent efforts. Bangladeshs garment and textile sector has already emerged as the worlds second largest producer, according to IMF (International Monetary Fund), and it might continue to dominate its once larger neighbouring players like Pakistan and Sri Lanka. Last year, Pakistan exported textiles worth about $10.50 billion and while it is obvious that this figure will significantly go down in 2009 the challenge for the Textile Ministry is to arrest this declining trend and get the national industry back on track towards investment and growth. The thing to remember here is that in any endeavour to rejuvenate entrepreneurial interest in textiles, all support measures will be ineffective unless to start with they can meaningfully contribute to improving industrys operating margins in the near term