As global supply chains redraw themselves, Pakistan eyes an opening. But opportunity, like investment, prefers certainty.An Economist’s analysis of whether Pakistan can capture manufacturing shifts away from China amid tariff shocks, ASEAN competition, and global supply‑chain realignment. Includes comparative data, SEO‑aligned insights, and a forward‑looking verdict.

Executive Summary

China’s long reign as the world’s workshop is being nudged—gently by rising wages, firmly by geopolitics, and abruptly by tariff regimes that have turned supply chains into diplomatic battlegrounds. ASEAN economies have already emerged as prime beneficiaries, with Chinese manufacturing FDI accelerating into Vietnam, Malaysia, and Indonesia. Pakistan, meanwhile, sits on the periphery of this realignment: geographically strategic, economically under‑utilised, and chronically inconsistent.

This article examines whether Pakistan can realistically capture a slice of the “China+1” diversification wave. It compares industrial land costs, energy tariffs, labour productivity, logistics performance, and export‑processing capacity across Pakistan, China, Vietnam, Bangladesh, and ASEAN peers. The conclusion is neither triumphalist nor fatalistic: Pakistan has a narrow window, but only if it can deliver reliability—something investors value more than cheap land or poetic promises.

A shifting workshop

For decades, China has been the gravitational centre of global manufacturing. Its ports hummed, its factories glowed, and its supply chains ran with the precision of a Swiss watch—albeit one assembled at industrial scale. But the world’s workshop is undergoing a quiet rearrangement. Rising wages, demographic shifts, and geopolitical tariffs—some exceeding 30% on Chinese-linked exports to the United States—have encouraged firms to diversify. The “China+1” strategy, once a consultant’s buzzword, is now a boardroom imperative.

ASEAN economies have been the early winners. Vietnam’s manufacturing FDI inflows surged as firms sought tariff‑free access to Western markets and lower geopolitical risk premiums. Bangladesh, too, has ridden the wave in textiles. Pakistan, by contrast, has mostly watched from the sidelines, occasionally waving from its Special Economic Zones (SEZs) like a hopeful host awaiting guests who never quite arrive.

Yet the opportunity is real. The question is whether Pakistan can seize it—or whether it will once again be outpaced by nimbler neighbours.

Industrial land: cheap, but not cheerful

Industrial land is Pakistan’s first selling point. SEZ plots under the China‑Pakistan Economic Corridor (CPEC) range from $30–$60 per square metre, significantly cheaper than Vietnam’s industrial zones, where prices often exceed $100–$150 per square metre. Bangladesh sits somewhere in between, with zones priced around $50–$90.

But cost is only half the story. Zoning clarity, titling security, and utility readiness matter more. Here Pakistan’s advantage evaporates. Investors routinely complain of:

• Delayed land possession
• Incomplete utilities at “ready” sites
• Fragmented provincial regulations

China, by contrast, offers plug‑and‑play industrial parks with near‑instant utility hookups. Vietnam’s zones, though pricier, offer reliability—an attribute investors treat as a premium good.

Energy: the Achilles’ heel

Energy tariffs in Pakistan are among the highest in Asia on a cost‑per‑unit basis. Industrial electricity rates hover around $0.14–$0.18/kWh, compared with:

• Vietnam: ~$0.08–$0.10
• Bangladesh: ~$0.09
• China: ~$0.08–$0.12

Pakistan’s chronic circular debt, load‑shedding, and grid instability further erode competitiveness. Uptime—a metric manufacturers obsess over—remains inconsistent. A factory that loses power for even 30 minutes a week loses contracts in industries where seconds matter.

Digital uptime is no better. Server‑level reliability and data‑centre redundancy lag behind ASEAN peers, limiting Pakistan’s attractiveness for high‑tech assembly or integrated supply‑chain operations.

Labour: abundant but uneven

Pakistan’s labour force is young and inexpensive, with manufacturing wages averaging $150–$170 per month, lower than Vietnam’s $250–$300 and China’s $600+. But productivity tells a different story.

Vietnam’s labour productivity has grown rapidly due to vocational training and FDI‑driven skill transfer. Bangladesh, despite lower wages, has achieved enviable efficiency in garments through scale and process discipline.

Pakistan’s productivity remains inconsistent, hampered by:

• Limited vocational training
• Low female labour‑force participation
• Weak firm‑level management practices

Cheap labour is not enough; efficient labour is what investors seek.

Logistics: geography helps, governance hinders

Pakistan’s geography is enviable. It sits at the crossroads of South Asia, Central Asia, and the Middle East. Karachi Port and Port Qasim handle the bulk of trade, while Gwadar remains more promise than port.

Yet logistics performance lags. Pakistan’s Logistics Performance Index (LPI) score trails Vietnam and China, reflecting slower customs clearance, weaker warehousing, and inconsistent transport corridors.

China’s Belt and Road investments were meant to fix this. But CPEC’s industrial zones remain incomplete, and transport corridors—while improved—still lack the seamless integration seen in ASEAN.

Export‑processing capacity: the missing middle

China’s export‑processing zones are legendary for their efficiency. Vietnam has replicated the model with surprising speed, offering:

• 24/7 customs
• Integrated bonded warehouses
• Fast‑track approvals

Pakistan’s export‑processing zones (EPZs), by contrast, are small, bureaucratic, and under‑utilised. Processing times are slower, and regulatory exemptions are narrower. Investors seeking speed—especially in electronics, garments, and auto parts—prefer environments where paperwork does not outlive the product cycle.

FDI flows: following the path of least resistance

FDI follows predictability. ASEAN economies have become top destinations for Chinese manufacturing FDI, driven by tariff arbitrage and supply‑chain diversification. Vietnam, Malaysia, and Indonesia now attract billions annually.

Pakistan’s FDI inflows, meanwhile, remain modest. Tariff‑driven trade diversion may offer temporary relief—analysts note that US tariffs on Bangladesh, Vietnam, and China could redirect some trade toward Pakistan—but such shifts are opportunistic, not structural.

Investors want ecosystems, not episodes.

Geopolitics: a double‑edged sword

Pakistan’s strategic alignment with China is both an asset and a liability. On one hand, it offers access to Chinese capital, technology, and supply‑chain integration. On the other, it exposes Pakistan to geopolitical risk premiums—especially in Western markets wary of Chinese value‑chain entanglement.

Vietnam, by contrast, has mastered the art of being everyone’s friend and no one’s satellite. Bangladesh has positioned itself as politically neutral and commercially predictable.

Pakistan’s foreign‑policy posture, while improving, still carries perceived volatility.

Can Pakistan capture the opportunity?

The short answer: yes, but only if it fixes reliability.

Pakistan does not need to match China’s scale or Vietnam’s efficiency. It needs to offer a credible alternative for specific industries:

• Textiles and apparel
• Leather and footwear
• Light engineering
• Home appliances
• Auto parts
• Low‑to‑mid‑tech assembly

But credibility requires reforms in five areas:

1. Energy reliability — uninterrupted power at competitive tariffs.
2. Industrial land readiness — plug‑and‑play zones, not promises.
3. Logistics modernisation — faster ports, digitised customs, integrated corridors.
4. Labour productivity — vocational training aligned with industry needs.
5. Regulatory predictability — stable policies, fewer surprises.

Without these, Pakistan will remain a spectator in Asia’s manufacturing reshuffle.

A forward‑looking verdict

The global manufacturing map is redrawing itself. China’s shift is real; ASEAN’s rise is undeniable; Bangladesh’s discipline is instructive. Pakistan has the ingredients for competitiveness but lacks the consistency investors crave.

If Pakistan can deliver reliability—of power, policy, and process—it could capture a meaningful share of the China+1 wave. If not, the country risks watching yet another industrial revolution pass by, waving politely from the sidelines.

Data Highlights Table

Indicator	Pakistan	China	Vietnam	Bangladesh	ASEAN Avg
Industrial land cost ($/sqm)	30–60	120–300	100–150	50–90	80–200
Electricity tariff ($/kWh)	0.14–0.18	0.08–0.12	0.08–0.10	~0.09	0.08–0.12
Monthly manufacturing wage ($)	150–170	600+	250–300	120–150	250–400
LPI score (0–5)	~2.4	~3.6	~3.3	~2.6	~3.0
FDI inflows (manufacturing)	Low	Very high	High	Moderate	High
Export‑processing efficiency	Low	Very high	High	Moderate	High

Some contextual insights informed by search results on tariff‑driven diversification and ASEAN’s FDI surge.