By Qudsia Bano

The global shift towards nearshoring is creating a rare opportunity for Pakistan to attract export-oriented manufacturing and diversify its industrial base, but experts say the country must accelerate reforms and improve implementation if it is to win over relocating investors.

As geopolitical tensions and supply-chain disruptions continue to reshape global manufacturing, companies are increasingly relocating production closer to major consumer markets to reduce costs and improve supply-chain resilience.

According to recent international trade data, developing countries' share of global manufacturing exports increased by five percentage points in 2024, reflecting the ongoing restructuring of global production networks. Analysts say this trend is creating fresh opportunities for cost-competitive manufacturing destinations across South Asia, including Pakistan.

Pakistan already possesses several competitive advantages. Special Economic Zone (SEZ) land developed under the China-Pakistan Economic Corridor (CPEC) is available at around US$30-60 per square metre, significantly below industrial land prices in Vietnam, where comparable plots often exceed US$100-150 per square metre.

The country's broader industrial expansion is also being supported under CPEC's second phase, which seeks to attract export-oriented industries, renewable energy equipment manufacturing and electric vehicle-related investments. According to the Board of Investment, enterprises operating in SEZs receive a one-time exemption from customs duties and taxes on imported capital goods, along with a 10-year income tax holiday.

Beyond manufacturing, Pakistan has already demonstrated export competitiveness in knowledge-based industries. According to the Pakistan Software Export Board, IT and IT-enabled services exports reached a record US$3.8 billion during FY2024-25, highlighting the country's ability to compete internationally when supported by enabling policies.

The government is also pursuing government-to-government industrial parks in Karachi and Islamabad to attract investment in electronics, pharmaceuticals, textiles and electric vehicles. However, implementation remains a challenge. Speaking at the Pakistan-China Industrialisation Dialogue in Islamabad, Federal Minister for Investment Qaiser Ahmed Sheikh noted that only four Special Economic Zones had progressed beyond the planning stage with partial implementation by 2025.

Experts believe Pakistan already possesses many of the ingredients needed to benefit from global manufacturing realignment, including competitive production costs, a young labour force, improving CPEC-linked connectivity and investor incentives. They say the country's success will ultimately depend on translating policy commitments into efficient implementation, enabling Pakistan to convert the global nearshoring trend into sustained industrial growth and stronger export performance.

Speaking to Wealth Pakistan, Muhammad Usman, Manager at Premier Energy Lahore, said global manufacturers are increasingly seeking cost-competitive production locations supported by predictable investment policies.

He said Pakistan's competitive land prices, SEZ incentives and improving connectivity provide a strong foundation for attracting industrial relocation, particularly in solar manufacturing, electric vehicle components and energy storage systems.

Usman stressed, however, that success would depend on the speed of implementation.

He said streamlined regulatory approvals, faster land development and investor facilitation would determine whether Pakistan secures relocation projects or loses them to regional competitors.

According to him, the opportunity extends beyond foreign direct investment alone. Technology transfer and integration into emerging clean-energy supply chains could generate lasting gains for Pakistan's industrial sector.

He noted that the International Energy Agency projects global clean-energy investment to reach US$2.2 trillion in 2025—almost twice the level of fossil-fuel investment. Capturing even a small share of this expanding market through export-oriented SEZs could significantly boost employment and export earnings.

Dr Hassan Daud Butt, former Project Director of CPEC and Senior Adviser at China Energy Engineering Corporation, told Wealth Pakistan that fiscal incentives alone are insufficient to attract nearshoring investment.

He said successful export-oriented industrial zones combine tax concessions with dependable energy supplies, efficient customs procedures, strong transport connectivity and competitive logistics costs.

According to Butt, reducing logistics costs should become a national priority because supply-chain efficiency increasingly determines where manufacturers choose to invest.

He added that Pakistan's opportunity to benefit from global nearshoring remains open but will not last indefinitely.

With IT and IT-enabled services already accounting for about 45% of Pakistan's services exports, according to State Bank of Pakistan data, Butt said a similarly focused strategy for manufacturing SEZs could diversify exports and reduce dependence on traditional commodities.

Credit: INP-WealthPk