New Delhi, July 23 (IANS) Pakistan’s inability to translate massive infrastructure investments under the China-Pakistan Economic Corridor (CPEC) into sustained industrial growth and economic competitiveness has emerged as the project’s biggest shortcoming, according to a new analysis.
The report cited by Business Recorder argues that the debate surrounding CPEC has become polarized, with one side describing it as a transformational success that modernised Pakistan’s infrastructure and the other blaming it for many of the country’s economic problems.
However, it says both narratives overlook the central issue — the country’s failure to develop the complementary policies and institutions needed to maximise the benefits of the investment.
With an investment envelope of nearly $62 billion, CPEC enabled Pakistan to build roads, power plants, electricity transmission systems and develop Gwadar Port.
Despite these investments, the country continues to grapple with rising electricity tariffs, mounting circular debt, weak industrial competitiveness and an underutilised Gwadar Port, the report mentioned.
According to the analysis, the problem was not a lack of investment but shortcomings in planning and execution.
The power sector is cited as the clearest example. While Pakistan rapidly expanded electricity generation capacity to address chronic power shortages, reforms in transmission, distribution, loss reduction and electricity market development failed to keep pace.
As a result, consumers are burdened with capacity payments even when electricity generation remains underutilised, contributing to higher tariffs and worsening circular debt.
The report also questions Pakistan’s reliance on imported coal for several CPEC power projects, arguing that the strategy created long-term exposure to foreign exchange fluctuations and permanently increased electricity costs through imported fuel and transportation expenses.
High electricity tariffs have also undermined Pakistan’s manufacturing competitiveness, making energy-intensive industries less competitive than counterparts in countries such as Bangladesh, Vietnam, India, Indonesia and China.
Instead of supporting industrialisation and exports, the power sector has become a constraint on economic growth, the analysis says.
The report similarly points to Gwadar Port, noting that while it was envisioned as the centrepiece of an integrated industrial and logistics ecosystem, supporting industries, export-oriented manufacturing, skilled labour, efficient regulations and reliable public services failed to develop alongside the infrastructure.
It adds that infrastructure projects alone cannot generate economic activity without competitive industries and an enabling business environment.
–IANS
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