Mehmood ul Hasan Qadir — Economist & Financial Analyst | Dubai, UAE

The Pakistan Ledger | Opinion

When China established its first Special Economic Zones in Shenzhen, Zhuhai, Shantou, and Xiamen in 1980, the ambition was explicit and the execution was formidable. Within a decade, Shenzhen had transformed from a fishing village to a manufacturing city of millions. Within two decades, China’s SEZ model had catalysed the largest industrial transformation in human economic history. Pakistan’s CPEC Special Economic Zones — announced with considerable fanfare as part of the $62 billion China-Pakistan Economic Corridor framework — were designed to replicate some element of this success on Pakistani soil. After years of development, the number of operational factories in Pakistan’s CPEC SEZs can be counted without exhausting the fingers of two hands. This is not a minor implementation gap. It is a structural failure that deserves honest analysis.

CPEC SEZ Investment — Planned vs. Reality

Nine Special Economic Zones were initially designated under the CPEC framework across Pakistan’s provinces. The investment targets cited in government documents — and repeated in international press coverage — ran into billions of dollars of projected industrial investment, thousands of factory units, and hundreds of thousands of direct employment opportunities. The actual investment committed, actually disbursed, and actually resulting in operational production facilities has fallen far short of these projections across all nine zones.

The Allama Iqbal Industrial City in Faisalabad — the most advanced of the CPEC SEZs — has made meaningful progress in land development, utility provisioning, and plot allocation. But the transition from allocated plots to operating factories has been slow. The Rashakai Special Economic Zone in KPK has similarly seen significant infrastructure investment with limited translation into manufacturing employment. The Board of Investment’s own tracking data — when available and disaggregated from planned-to-operational figures — tells a story of infrastructure built on a timeline that has not been matched by enterprise investment.

Why Chinese Enterprises Have Not Relocated to Pakistan’s SEZs

The stated CPEC industrial cooperation ambition was that Chinese manufacturing enterprises — facing rising labour costs in China’s coastal provinces — would relocate labour-intensive production to Pakistan’s SEZs, replicating a dynamic that had earlier moved Chinese manufacturing from eastern to central and western provinces. This relocation has not occurred at meaningful scale, and the reasons are instructive.

Chinese manufacturers considering overseas production are comparing Pakistan against Vietnam, Cambodia, Bangladesh, and Ethiopia. On the critical variables — labour cost, infrastructure reliability, regulatory predictability, supply chain proximity, and political stability premium — Pakistan scores poorly against most of these alternatives. Vietnam offers infrastructure of comparable quality, lower political risk, ASEAN market access, and established supply chain networks. Bangladesh offers established textile supply chains, GSP+ access, and decades of garment manufacturing institutional knowledge. The case for relocating Chinese manufacturing to Pakistan requires Pakistan to offer a decisive advantage on at least one of these dimensions — and the SEZ framework, as implemented, does not yet deliver sufficient advantage to override the competition.

The Utility Provision Failure

One-window facility — the administrative mechanism through which investors in Pakistan’s SEZs are supposed to receive all regulatory approvals and services from a single point of contact — has been a persistent underperformer. SEZ developers and the Board of Investment have documented the gap between one-window conceptualisation and one-window reality: utility connections (electricity, gas, water) require coordination with multiple agencies whose approval processes have not been streamlined; environmental no-objection certificates involve multiple provincial agencies; customs facilitation requires FPCCI and customs department coordination that is imperfectly integrated with SEZ administration.

The electricity situation is particularly critical. Pakistan’s SEZs are supposed to provide reliable, competitively-priced electricity as a core investor attraction. The circular debt and the DISCO system’s operational challenges mean that even in designated priority zones, power supply reliability is not consistently at the standard international manufacturing enterprises require. A factory running 24-hour production shifts cannot absorb the power fluctuations and occasional outages that are part of Pakistan’s electricity grid reality.

What Real SEZ Success Requires

The Shenzhen comparison is instructive not because Pakistan can replicate it — the political and economic context is entirely different — but because it illustrates what genuine SEZ commitment looks like. Shenzhen received extraordinary political priority, dedicated infrastructure investment, legal and regulatory framework that was genuinely differentiated from the surrounding economy, and sustained leadership attention for a decade before results were visible at scale. Pakistan’s SEZs have received a fraction of this commitment.

If Pakistan is serious about using SEZs to attract manufacturing investment, it requires a surgical approach: select two or three zones for full-priority infrastructure and regulatory treatment rather than spreading effort across nine under-resourced zones; guarantee electricity supply through dedicated generation within zone perimeters; establish genuine one-window authority with power to override departmental delays; and offer competitive land and utility pricing that makes the economic case for Pakistan SEZ investment clear relative to regional alternatives. Special Economic Zones that are special only on paper are not a development strategy. They are a planning document.

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Mehmood ul Hasan Qadir is an Economist and Financial Analyst based in Dubai, UAE. He writes on Pakistan’s economic structure, policy failures, and reform pathways for The Pakistan Ledger.