Pakistan's failure to convert the China-Pakistan Economic Corridor (CPEC)'s near-$62 billion investment into sustained industrial growth and economic competitiveness has emerged as the corridor's most significant shortcoming, according to a new analysis cited by Business Recorder. The report, released in July 2025, argues that neither the project's defenders nor its critics have identified the real problem.

The Polarised Debate Misses the Point

The analysis notes that commentary on CPEC has split into two entrenched camps — one crediting the corridor with modernising Pakistan's infrastructure, the other holding it responsible for the country's deepening economic difficulties. Both narratives, the report contends, sidestep the central failure: Pakistan's inability to develop the complementary policies and institutions needed to extract maximum benefit from the investment.

The problem, according to the analysis, was not a shortage of capital. It was a deficit in planning and execution.

Power Sector: A Cautionary Tale

The electricity sector is cited as the starkest illustration of this gap. Pakistan rapidly scaled up generation capacity to tackle chronic power shortages — a headline achievement of CPEC. However, reforms in transmission infrastructure, distribution networks, loss reduction, and electricity market development failed to keep pace with that expansion.

The consequence is that consumers now bear capacity payments for power that often goes unused, pushing up tariffs and deepening the country's circular debt crisis. The report also questions the strategic decision to rely on imported coal for several CPEC power projects, arguing it locked Pakistan into long-term exposure to foreign exchange volatility and structurally elevated electricity costs through fuel import and transportation expenses.

Manufacturing Competitiveness Eroded

High electricity tariffs have had a direct knock-on effect on industrial competitiveness. Energy-intensive sectors in Pakistan are now at a measurable disadvantage compared with manufacturers in Bangladesh, Vietnam, India, Indonesia, and China itself. Rather than serving as an enabler of industrialisation and export growth, the power sector has become a structural constraint on the broader economy, the analysis concludes.

Gwadar Port: Infrastructure Without an Ecosystem

Gwadar Port — envisioned as the centrepiece of an integrated industrial and logistics hub — presents a parallel story. The port's physical infrastructure was developed, but the surrounding ecosystem it required never materialised. Supporting industries, export-oriented manufacturing clusters, a skilled labour base, efficient regulatory frameworks, and reliable public services all lagged behind. The report underscores a broader principle: infrastructure alone cannot generate sustained economic activity without competitive industries and an enabling business environment.

What the Analysis Recommends

The report stops short of writing off CPEC entirely, but its diagnosis is clear — the corridor's returns will remain sub-optimal unless Pakistan addresses the institutional and policy gaps that have prevented investments from translating into industrial output. With CPEC's second phase reportedly under discussion, the pressure to course-correct is mounting. Whether Islamabad can build the enabling environment that the first phase lacked will likely determine the corridor's ultimate legacy.