Iran is to spend $500m from its oil stabilisation fund to rescue the country's ailing textile industry.

The government has responded to public protest after unpaid textile workers in Tehran and Isfahan staged street protests.

President Mohammad Khatami said the government had launched a plan to revive the textile sector, but the government has not said how it intends to spend the $500m it is injecting into the industry.

Nationalisation of the country's textile industry after the 1979 Islamic Revolution led to a general decline in the sector which employs 350,000 people.

The country now has a lot of imported cloth. Even black fabric used to make the "chador", the head-to-toe cloak worn by many women, is bought in from Asia.

Unrest in the sector has surfaced again since the government and religious foundations accelerated the sell-off of loss-making factories.

And some industrialists trying to run a textile business have hit problems because of high taxes, tough labour laws and a climate that does not favour small enterprises.