New Delhi–Pakistan has failed to convert billions of dollars in infrastructure investment under the China-Pakistan Economic Corridor into sustained industrial growth and greater economic competitiveness, according to a new analysis.
The report, cited by Business Recorder, said the public debate over CPEC has become increasingly polarized. Supporters describe the initiative as a transformational success that modernized Pakistan’s infrastructure, while critics blame it for many of the country’s economic difficulties.
Both arguments, however, overlook the central problem: Pakistan did not develop the policies, institutions and business environment needed to fully benefit from the investments, the analysis said.
CPEC, with an estimated investment portfolio of nearly $62 billion, helped finance roads, power plants, electricity transmission systems and the development of Gwadar Port.
Despite those projects, Pakistan continues to face rising electricity rates, mounting circular debt, weak industrial competitiveness and limited use of Gwadar Port.
The analysis said the primary problem was not a shortage of investment, but weaknesses in planning and execution.
Pakistan’s power sector was cited as the clearest example. The country rapidly expanded electricity generation capacity to address chronic shortages, but reforms to transmission, distribution, loss reduction and electricity markets did not keep pace.
Consumers are consequently required to cover capacity payments even when power plants remain underused. That has contributed to higher electricity rates and increased circular debt, the report said.
The analysis also questioned Pakistan’s use of imported coal for several CPEC power projects. It said the strategy exposed the country to foreign exchange fluctuations while permanently increasing electricity costs through imported fuel and transportation expenses.
High energy costs have weakened Pakistan’s manufacturing sector, particularly industries that consume large amounts of electricity. Those businesses have become less competitive than rivals in Bangladesh, Vietnam, India, Indonesia and China.
Rather than supporting industrialization and export growth, the power sector has increasingly become a constraint on Pakistan’s economy, the report said.
The analysis also highlighted the limited economic development surrounding Gwadar Port. Although the port was intended to serve as the centerpiece of an integrated industrial and logistics network, supporting industries and export-oriented manufacturing failed to develop alongside it.
Gwadar has also been held back by shortages of skilled labor, inefficient regulations and unreliable public services, according to the report.
The analysis concluded that infrastructure projects cannot generate lasting economic activity on their own. Such investments must be supported by competitive industries, effective institutions and a business environment capable of attracting private investment and expanding exports. (Source: IANS)
