Pakistan’s Industrial Revival: Can UNIDO’s PCP Deliver What Others Could Not?
The economy of Pakistan is at the crossroads. Industrial recovery has been crippled by devastating floods of 2022, the COVID-19 pandemic, the Russia-Ukraine war, and the escalation of inflation. Pakistan’s exports remain heavily dependent on textiles. Youth unemployment is a ticking time bomb, and climate vulnerability is a threat to undo hard-won gains. Due to extreme weather conditions 40% of its population is exposed to disasters. In response to these challenges, the Programme for Country Partnership (PCP) by the United Nations Industrial Development Organization (UNIDO) provides a unique strategic opportunity.
The formal inauguration of the PCP took place in Vienna during a visit by PM Shehbaz Sharif and Deputy Prime Minister and Foreign Minister Ishaq Dar in February 2026. During the ceremony, “Sustainable Development: Pathways for Global Peace and Prosperity” highlighted the connection between the industrial policy and general stability. Deputy Prime Minister Dar highlighted that “UNIDO is at the centre of Pakistan's poverty eradication, job creation and transition towards cleaner and more resilient industries as a catalyst for inclusive and sustainable industrialization.” If followed with discipline and realism, it could prove to be a catalyst for the sustainable and inclusive industrial growth that is significantly needed in Pakistan. Otherwise, it might be another well-intentioned but ineffective framework.
In the evolving global environment, the Programme for Country Partnership (PCP) has become UNIDO's primary model for implementation. The PCP links national industrial priorities with the Sustainable Development Goals (SDGs). It connects governments, development partners, financial institutions and the private sector. The vision is to build investment and catalyze structural economic transition through collective action. The Director General of UNIDO, Mr. Gerd Muller, termed the PCP a vehicle for industrial development.
Additionally, the PCP aligns with the “URAAN Pakistan (2024-2029)” initiative and the wider 5Es development framework. The 5Es refer to Exports, E-Pakistan, Environment and Climate Change, Energy and Infrastructure, and Equity and Empowerment. URAAN Pakistan is Prime Minister Shehbaz Sharif's five-year plan for sustainable economic growth and development. It aims to increase Pakistan's exports to $60 billion by 2028 and to receive $10 billion of private investment every year. It is an effort to connect industrial policy with other socio-economic objectives. Also, with a strong backing from partners, including Saudi Arabia, the EU, China and Japan. The collaboration between UNIDO and Pakistan has also gained significant institutional momentum. In 2025, Ambassador Kamran Akhtar was elected as the President of the 53rd session of the UN Industrial Development Board. This further reflects Pakistan's rising presence in the industrial governance landscape globally.
It also marks a shift towards medium-term development planning in a fragmented policy framework. The PCP has three strategic pillars. First, an agenda for a clean energy transition and climate resilience. Secondly, industrial expansion and value chain improvement for export. Third, green industrialization and sustainable development of minerals. Collectively, these pillars aim to shift Pakistan’s industrial base towards sustainability and competitiveness. However, past experiences suggests that there is a need for caution. Several recurring issues that emerge from global assessments of the UNIDO PCP framework. These are lack of national commitment at high level, low investment in financial resources, low investment in human resources, low private sector investment, and inadequate monitoring. In addition, there are several structural risks in Pakistan.
First, industrial initiatives have long been plagued by coordination problems. Federal and provincial governments are frequently divided over responsibilities. The PCP relies on cooperation between the government, donors, financial institutions, and the private sector. However, with poor coordination, a programme could suffer similar problems to previous programmes.
Second, there remains a problem with elite capture and rent-seeking. Pakistan has a history of subsidizing and protecting inefficient industries with industrial policies. However, these measures have not frequently led to productivity or competitiveness improvements. To achieve the green and export targets of the PCP, incentives must be based on performance and must be given to competitive firms, not to politically connected interests. Thirdly, the issue of skills mismatch is a major one. Programmes such as the Prime Minister's Youth Skill Development Programme and NAVTTC are important initiatives. However, they should be more industry-relevant. Education should focus on green technologies, digital skills and value chain development. If youth is the asset, they need to have the relevant and market driven skills.
The green industrialization agenda is important but has practical challenges. A developing country in which energy resources are limited and energy prices are high requires more than policy statements to mainstream clean energy and resource efficiency into the manufacturing mainstream. The support for rural programs such as Poverty Alleviation and Inclusive Development (PAIDAR) in four districts of Sindh. The intent of this initiative is inclusive, but scaling up requires real community and private sector participation.
The June 2026 dialogue hosted by the Permanent Mission of Pakistan and UNIDO highlighted investment mobilization, export capacity building and sustainable development. Pakistan cannot afford the pattern of big promises and poor performance.