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CAIRO (Reuters) - Egypt's once-famous cotton industry risks a slow death without state investment to reverse decades of neglect, boost quality and encourage farmers to keep growing the crop.

Analysts say the textiles sector has been overlooked amid a wave of other reforms.

"It's not easy to reverse the effects of years and years of neglect," said Mena Sadek, consumer goods analyst at investment bank Beltone Financial. "Anything you do without restructuring will not work. It will be a short-term solution."

In its heyday in the 1960s, Egypt's "white gold" was highly sought after by those seeking smooth luxury bedsheets, soft thick towels and lavish apparel.

But cheaper raw cotton imports have made inroads as ailing textile firms, stunted after decades of poor investment, have focused on creating low-quality products. Farmers are also turning away from cotton to more lucrative crops such as corn.

The state has long promised to pay more attention to the sector. But the textile industry is bogged down by old machinery, and lacks the design and technology expertise among its workers that is needed to lure foreign firms to Egypt.

"The market is unbalanced," said Mohamed Abdel Aziz, head of Egypt's state-run Cotton Research Institute. "The industry was neither really privatised nor left public."

Liberalisation in 1994 exposed farmers to volatile global prices and rising fertiliser costs. Lower domestic demand for pricey extra long staple cotton also took a toll as spinners turned to cheaper, lower-quality imports.