Pakistan falls short of SEZ investment and jobs targets, minister says

ISLAMABAD: Pakistan has fallen well behind its targets for attracting more than $8 billion in foreign direct investment and creating 500,000 jobs through Special Economic Zones between 2018 and 2024, Investment Minister Qaiser Ahmed Sheikh said on Tuesday.

Speaking at the Pakistan-China Industrialisation Dialogue in Islamabad, the minister said that by 2025 only four SEZs had moved beyond the planning stage and reached partial implementation. He identified these as Rashakai in Khyber Pakhtunkhwa, Allama Iqbal Industrial City in Punjab, Dhabeji in Sindh, and Bostan in Balochistan.

Sheikh said nine SEZs had been designated in the first phase of the China-Pakistan Economic Corridor, covering sectors such as food processing, ceramics, textiles, pharmaceuticals and auto assembly. He said Pakistan was now entering what he described as a decisive stage of CPEC, with emphasis shifting to industrialisation, export-led growth and stronger business-to-business cooperation.

Pakistan has immense potential, but we must transition from an import-driven economy to one that produces and exports value-added goods

The minister said the Joint Cooperation Committee, during its meeting in Beijing last September, proposed government-to-government SEZs in Karachi and Islamabad aimed at Chinese industrial relocation in electronics, textiles, pharmaceuticals and electric vehicles. He added that Pakistan had also proposed government-to-government industrial parks to attract Chinese manufacturing capacity as production costs rise in China.

Trade imbalance with China

Sheikh said China had remained Pakistan’s largest trading partner for 12 straight years. He noted that Chinese exports to Pakistan increased from $16.67bn in 2023 to $20bn in 2024, marking a 17.7pc year-on-year rise, while Pakistan’s exports to China stayed around $3bn annually despite China’s total yearly imports of $2 trillion.

According to the minister, this has produced a structural imbalance in bilateral trade. He said Pakistan mainly exports primary goods including cotton, seafood and gum resins, while importing capital goods, machinery, organic chemicals and electronics from China.

He said the first phase of the China-Pakistan Free Trade Agreement, in force since 2007, expanded bilateral trade by 242pc between 2007 and 2018. However, Pakistan’s trade deficit with China also increased during that period from 25pc to 35pc of bilateral trade, reaching $13bn.

Sheikh said the second phase of CPEC, centred on industrialisation, was intended to narrow this export gap through value-added manufacturing for re-export to the Chinese market.

CPEC investment and employment

The minister said CPEC was initially valued at $46bn in 2015, rising to $62bn by 2020 and $65bn by 2022. He described it as China’s largest overseas investment and Pakistan’s biggest inbound investment since independence.

He said the latest factsheet showed CPEC had brought in $30bn in realised investment across energy, transport and industrial sectors, while directly creating more than 261,000 jobs. He added that the 1,320MW Port Qasim coal power project alone generated over 5,000 direct local jobs, while the Sahiwal coal power plant created more than 3,770 direct positions.

Sheikh also said the CPEC Consortium of Universities now included 130 member institutions from both countries, supporting academic linkages and joint research. He added that Pakistan and China had established vocational training infrastructure to address industrial workforce skills gaps.

According to the minister, labour-intensive manufacturing in textiles, electronics assembly and light engineering has the potential to create 500,000 formal jobs within the CPEC framework by 2030. He also said internet penetration in Pakistan rose from 11pc in 2015 to 54pc by 2024, laying the groundwork for digital-industrial integration.

CPEC’s commerce value grew from $4.8bn in 2015 to $16bn in 2023, and with the second phase fully operationalised, projections suggest Pakistan’s industrial export capability could increase by 20pc, provided that SEZ governance, security infrastructure, and regulatory frameworks are brought to investment-grade standards

ML-1 and future cooperation

Referring to the Mainline-1 project, Sheikh said it would support industry by cutting freight transit time between Karachi port and inland manufacturing centres by an estimated 40pc, reducing logistics costs that take up a large share of manufacturers’ expenses.

The project has faced financing realignments, with Pakistan exploring ADB (Asian Development Bank) co-financing for some segments previously designated for Chinese concessional loans, reflecting the broader need to diversify CPEC’s financing architecture as the second phase advances

At the dialogue, Chinese embassy Counsellor Yang Guangyuan highlighted what he described as broad scope for bilateral cooperation in agriculture, information technology, pharmaceuticals and manufacturing. He also referred to joint ventures including tyre production and industrial services, and reaffirmed China’s support for Pakistan’s industrialisation agenda under CPEC phase-II, while stressing the need to bring in more Chinese investors.

Participants at the event said that although China has remained Pakistan’s largest trading partner for more than a decade, the trade imbalance needs to be addressed by increasing Pakistan’s exports through value-added manufacturing. They agreed that CPEC Phase II offers a strategic opening to pursue that goal.