Pakistan's textile sector is facing a major crisis as the industry fails to find the huge cash injection required for the essential Balancing, Modernization and Replacement (BMR) programme.

The industry needs to modernise plant, machinery and processes by the end of 2004, when the textile quota system comes to an end, but banks and financial institutions just cannot raise the huge funds requirement. The industry is banking on government intervention.

Dr Ikhtiar Baig, chairman of the APTMA banking committee, is worried: "We have no other choice except to upgrade the textile industry which is the highest foreign exchange earner as well as job provider for the country."

Schemes such as PAYE, the Supplier Credit Scheme, and the Non-Repatriatable Investment (NRI), which can be used to finance the sector, are still operational. However sanctions imposed on Pakistan mean that the country does not have access to deferred payments from donor countries. Local financial costs are very high, making the BMR investment unviable.

In "Textile Vision 2005," which was prepared by the Ministry of Commerce, the Government estimated that the textile industry would need $6bn to upgrade the production line and to become globally competitive as required after 2004. Only a few profitable textile groups have followed through the BMR programme by using their own funding. The rest - over 80 per cent of the industry - just cannot prepare for 2004.

By Navroz Havewala