Sovereign Wealth Fund and State Intervention

The Danantara sovereign wealth fund, managing $1 trillion in assets, is central to President Prabowo’s industrialization and investment agenda. While intended to boost efficiency and co-investment, increased state involvement and leadership changes have raised questions about governance, fiscal discipline, and market independence.

Infrastructure Investment and Public Finance

Vietnam is launching a new wave of infrastructure projects, targeting $5.5 billion in foreign loans for 2026 and up to $38 billion by 2030. While these investments aim to support growth and connectivity, persistent disbursement delays, land clearance issues, and public debt management remain key operational risks.

Cybersecurity Regulation and Critical Infrastructure Protection

Israel is advancing comprehensive cyber legislation, expanding reporting and compliance requirements for critical sectors. With the country among the most targeted globally, these measures aim to enhance national resilience and safeguard business operations, particularly in tech, energy, and logistics.

Cost Competitiveness Versus Traditional Construction

Modular construction in Germany is gaining ground over traditional methods due to faster build times and lower lifecycle costs. However, high initial investment and market misconceptions remain barriers, requiring targeted education and financial innovation to unlock broader adoption.

Trade Performance and Export Growth

Egypt’s non-oil exports rose 17% in 2025, narrowing the trade deficit and boosting foreign exchange. The government targets $145 billion in annual exports, leveraging trade agreements with the EU, US, Africa, and Arab states to diversify markets and support industrial growth.

FDI Reforms and High-Value Sector Focus

Thailand is shifting its investment strategy to attract FDI in high-tech, green infrastructure, and wellness tourism. Legal and regulatory reforms, infrastructure upgrades, and anti-corruption initiatives aim to reposition Thailand as a regional hub for future industries, but execution remains critical.

Investment Climate Amid Geopolitical Tensions

Geopolitical instability, including US-EU disputes and global conflicts, has led to increased market volatility and cautious investment. French markets have seen declines, and sectors like tech and industry face job cuts, prompting investors to adopt more defensive and selective strategies.

Geopolitical Leverage of Critical Minerals

China is leveraging its dominance in rare earths and other critical minerals as a tool in geopolitical disputes, notably with Japan. Subtle export restrictions and licensing delays create uncertainty for global manufacturers, especially in high-tech and automotive sectors, and may prompt supply chain realignment.

Renewable Energy and Green Investment Surge

Egypt signed $1.8 billion in renewable energy deals with Norway and China, aiming for 42% renewables by 2030. Major solar and battery projects, supported by international banks, position Egypt as a regional leader in clean energy, attracting technology and finance.

Continental Infrastructure and African Integration

Egypt prioritizes infrastructure-led economic integration across Africa, leading projects like the Lake Victoria-Mediterranean corridor. These initiatives enhance intra-African trade, create new supply chain routes, and position Egyptian firms as key players in continental development.

USMCA Review and Trade Uncertainty

The 2026 USMCA review is creating significant uncertainty for North American supply chains, especially as US President Trump has called the deal 'irrelevant' and threatened not to renew it. This could disrupt tariff-free trade, impacting automotive, electronics, and agricultural sectors.

Infrastructure Expansion and Regional Hub Ambitions

Massive investments in transport, ports, and logistics are positioning Egypt as a regional trade and manufacturing hub. Projects like the Suez Canal Economic Zone and logistics corridors aim to enhance supply chain resilience and attract multinational manufacturers seeking regional access.

Sustainable Energy Transition and Industrialization

Saudi Arabia is scaling up renewable energy, with solar and wind capacity expected to rise tenfold by 2040. Large-scale projects and energy storage are reshaping the power mix, supporting green industrialization and attracting investment in sectors aligned with global decarbonization trends.

Mandatory Bomb Shelter Integration Law

Poland’s Shelter Act (2026) requires all new multi-family and public buildings to include designated bomb shelter spaces. This regulatory shift significantly increases construction costs, impacts project timelines, and alters investment risk profiles for developers and international investors.

China-Pakistan Economic Cooperation Expansion

The second phase of CPEC is broadening from infrastructure to agriculture, technology, and minerals. New agreements focus on joint ventures, technology transfer, and value chain development, positioning China as Pakistan’s key strategic and economic partner, but also raising dependency and sovereignty concerns.

Agricultural and Resource Export Diversification

Australia continues to diversify export markets and products, leveraging new trade agreements and investments in minerals, agriculture, and technology. However, exposure to external shocks—such as Chinese trade actions or global commodity price swings—remains a significant risk for international investors and supply chains.

Industrial Policy and Strategic Sector Support

The government’s ‘Future Made in Australia’ agenda prioritizes strategic industries, including metals, energy, and advanced manufacturing, through subsidies, bailouts, and regulatory reforms. While boosting resilience and jobs, this approach raises questions about efficiency, regulatory complexity, and long-term competitiveness.

EU-UK Relations and Market Access

The UK government is exploring closer alignment with the EU single market to offset Brexit-related losses. Improved EU ties could boost UK GDP and productivity, but ongoing trade tensions and regulatory divergence continue to hamper seamless access for UK firms to the EU market.

Long-Term Erosion of Investment Climate

The cumulative effect of sanctions, revenue losses, and regulatory uncertainty is eroding Russia’s attractiveness for foreign direct investment. Persistent instability and heightened compliance risks are prompting international businesses to reassess or exit the Russian market.

AGOA Renewal and US Trade Relations

The three-year extension of the US Africa Growth and Opportunity Act (AGOA) provides crucial duty-free access for South African exports, supporting jobs and investment. However, eligibility reviews and strained US relations introduce uncertainty for long-term trade and supply chain planning.

Labor Market Weakens Amid Stagnation

Unemployment rose to 6.2% in December 2025, the highest since 2010, with nearly 2.91 million unemployed. The labor market faces demographic pressures, a persistent skills gap, and weak demand, impacting both domestic consumption and the attractiveness of Germany for international investors.

US Industrial Policy and Onshoring Wave

The US is leveraging trade deals and tariffs to attract unprecedented foreign investment, with over $5 trillion pledged by major partners for domestic manufacturing. This onshoring drive is reshaping global supply chains, especially in semiconductors and advanced manufacturing, but introduces new risks of retaliation, regulatory uncertainty, and supply chain fragmentation as partners hedge against US policy volatility.

Pivot to Asian and Friendly Markets

Russia has redirected over 85% of its trade to 'friendly' countries, notably China, India, and Central Asia, following Western sanctions. This shift has deepened economic ties, diversified export portfolios, and reduced Russia’s reliance on Western markets, but also increases exposure to geopolitical shifts in Asia.

Supply Chain Realignment and Diversification

US businesses are accelerating the shift of supply chains from China to Southeast Asia and other regions. Imports from Indonesia and Thailand rose over 30% in 2025, reflecting a new baseline for global sourcing and increased resilience against geopolitical shocks.

Trade Policy Uncertainty and Tariffs

Ongoing US tariff negotiations and underutilization of free trade agreements (FTAs) create uncertainty for exporters. Only 54% of eligible Thai firms use FTAs, and shifting US policies pose risks for trade-dependent sectors, requiring businesses to diversify markets and adapt strategies.

Domestic Infrastructure and Talent Pressures

Relocation of manufacturing and increased overseas investment may strain Taiwan’s domestic infrastructure and talent pool, potentially impacting innovation capacity and competitiveness at home, while intensifying the need for workforce development and policy adaptation.

Supply Chain Complexity and Disruption

Post-Brexit border controls, customs procedures, and rising transport costs have made UK-EU supply chains more complex and vulnerable to delays. Businesses must invest in compliance, logistics expertise, and route diversification to mitigate risks and maintain trade flow.

Trade Policy Uncertainty and Diversification

US tariffs (currently 19%) and global trade tensions are prompting Thailand to diversify export markets beyond the US and China. Efforts to expand FTAs, streamline certification, and access India and the Middle East are central to trade resilience and supply chain adaptation.

Humanitarian Crisis and Aid Access Constraints

Israel’s control over Gaza’s borders and restrictions on humanitarian aid have led to severe shortages and a potential famine. The reopening of the Rafah crossing is anticipated but not guaranteed. These dynamics disrupt logistics, increase compliance risks, and heighten reputational concerns for multinationals.

Australia–China Trade Tensions Escalate

Rising trade friction with China, including potential tariffs on steel and ongoing disputes over agricultural exports, threatens key sectors. Policy responses risk retaliation, supply chain disruptions, and market volatility, underscoring the need for diversification and robust risk management for international businesses.

Institutional Revitalization and Regulatory Cooperation

Canada and China have reactivated dormant trade and investment commissions, signed MOUs on energy, agriculture, and animal health, and pledged regular ministerial dialogues. These institutional mechanisms aim to resolve trade barriers and foster regulatory alignment, impacting market access and compliance.

Global Supply Chain Realignment

China’s supply chains have reallocated through third-party countries like Vietnam and Mexico, maintaining effective access to US and Western markets despite tariffs. This rerouting complicates compliance, origin tracing, and risk management for international businesses.

Automotive Sector Tariff and Rule Changes

Ongoing negotiations on auto tariffs and rules of origin are central to Mexico’s export competitiveness. Mexico seeks tariff reductions for non-compliant vehicles, while the US pushes for higher regional content. These changes directly impact investment and production strategies in the auto sector.

Labor Market Reform and Wage Pressure

2026 brings decisive labor reforms, including stricter inspections, higher minimum wages, and possible workweek reductions. These changes raise compliance costs and affect competitiveness, especially for SMEs and export-oriented sectors, while informal employment remains a persistent challenge.

Gaza Conflict Drives Regional Instability

The ongoing Gaza conflict, despite a fragile ceasefire, continues to destabilize Israel’s business environment. Persistent violence, humanitarian crises, and unresolved governance issues in Gaza create uncertainty for trade, investment, and supply chain continuity, especially for firms with regional exposure.

Export-Led Growth Under Global Pressures

Vietnam’s export-driven economy faces mounting US tariffs (up to 20%) and EU trade measures, threatening key market access. The government is actively diversifying export destinations to mitigate risks, but global trade tensions remain a significant operational challenge.