Pakistan misses SEZ targets as CPEC phase II refocuses on exports

Pakistan has fallen short of its Special Economic Zone (SEZ) investment and employment targets set under the China-Pakistan Economic Corridor (CPEC), with only four zones partially operational as of 2025, Investment Minister Qaiser Ahmed Sheikh said on Tuesday.

The country had aimed to attract over $8 billion in foreign direct investment and generate 500,000 jobs between 2018 and 2024, but implementation remained limited.

Out of nine SEZs designated in the first phase of CPEC, only Rashakai in Khyber Pakhtunkhwa, Allama Iqbal Industrial City in Punjab, Dhabeji in Sindh and Bostan in Balochistan have progressed beyond the planning stage, with partial development.

Speaking at the Pakistan-China Industrialisation Dialogue, the minister said Islamabad is now shifting focus to the second phase of CPEC, centred on industrialisation, export-led growth and business-to-business cooperation.

He said proposals discussed at the Joint Cooperation Committee meeting in Beijing last September include government-to-government industrial zones in Karachi and Islamabad to facilitate relocation of Chinese industries in sectors such as electronics, textiles, pharmaceuticals and electric vehicles, as production costs rise in China.

China has remained Pakistan’s largest trading partner for 12 consecutive years, but bilateral trade continues to show structural imbalance. Chinese exports to Pakistan rose from $16.67 billion in 2023 to $20 billion in 2024, while Pakistan’s exports to China have remained around $3 billion annually despite China’s overall import market of about $2 trillion.

Pakistan’s exports largely consist of primary commodities, including cotton, seafood and gum resins, while imports from China are dominated by machinery, chemicals, electronics and other capital goods.

The first phase of the China-Pakistan Free Trade Agreement, in force since 2007, expanded bilateral trade by 242 percent through 2018, but also widened Pakistan’s trade deficit with China to $13 billion, or 35 percent of total bilateral trade.

Officials say the second phase of CPEC is aimed at narrowing this gap through value-added manufacturing for export to China.

CPEC, launched in 2015 with an initial value of $46 billion, has expanded to $65 billion by 2022. It has so far brought in about $30 billion in realised investment across energy, transport and industrial sectors, creating over 261,000 direct jobs.

Major projects include the 1,320MW Port Qasim coal power plant, which generated more than 5,000 jobs, and the Sahiwal coal power plant, which created over 3,770 positions.

The government estimates that labour-intensive sectors such as textiles, electronics assembly and light engineering could generate up to 500,000 formal jobs by 2030 under the CPEC framework.

Supporting measures include expansion of the CPEC Consortium of Universities to 130 institutions and development of vocational training programmes to address industrial skill gaps. Internet penetration has also increased from 11 percent in 2015 to 54 percent in 2024, aiding digital integration.

CPEC-related commerce has grown from $4.8 billion in 2015 to $16 billion in 2023. Officials project that industrial export capacity could rise by 20 percent if governance, security and regulatory frameworks improve.

Separately, the Mainline-1 railway upgrade is expected to reduce freight transit time between Karachi and inland industrial hubs by around 40 percent, lowering logistics costs. The project is undergoing financing adjustments, with Pakistan exploring co-financing from the Asian Development Bank.

Chinese officials at the dialogue reaffirmed support for Pakistan’s industrialisation efforts and highlighted opportunities for cooperation in agriculture, information technology, pharmaceuticals and manufacturing.

Participants said CPEC Phase II offers a key opportunity to boost value-added exports and address the persistent trade imbalance.