Supply Chain Disruption and Logistics Risks

Railways, ports, and critical logistics hubs in Ukraine remain vulnerable to military attacks and blockades. Companies must adapt to unpredictable transport conditions, rerouting, and increased costs, impacting trade flows and operational reliability.

Sectoral Overdependence on Semiconductors

Despite headline export growth, non-semiconductor exports declined 1% in 2025. Korea’s heavy reliance on chips masks underlying vulnerabilities in other sectors, underscoring the need for diversification and innovation in manufacturing and services.

Persistent High Inflation Challenges

Turkey’s inflation remains elevated at 30.89%, with projections aiming for 16% by year-end. Tight monetary policy continues, impacting borrowing costs, consumption, and business planning. Inflation volatility poses risks to investment strategies and supply chain cost management.

Currency Stability and Financial Mechanisms

The Turkish lira has stabilized amid tight policy and high reserves, reducing currency risk for foreign investors. The central bank’s cautious rate adjustments and selective support for key sectors aim to maintain financial stability, impacting capital flows and operational planning.

Logistics, Ports, and Infrastructure Strain

Chronic underinvestment and operational challenges in logistics, ports, and transport infrastructure continue to disrupt supply chains. Flight delays, port congestion, and rail bottlenecks undermine export competitiveness and increase costs for international businesses operating in or sourcing from South Africa.

Sanctions, Export Controls, and Compliance Risk

The US is intensifying sanctions enforcement, especially on Iran and entities linked to protest crackdowns. New secondary sanctions and export controls, including on advanced technology, raise legal and operational risks for global businesses, requiring robust compliance systems and constant monitoring of regulatory changes.

Rising Role in Global Supply Chains

Indonesia is capturing a growing share of global supply chains as U.S.-China trade declines, with Indonesian imports to the U.S. rising 34% in 2025. This shift enhances Indonesia’s position as a sourcing hub, attracting investment and diversifying global manufacturing.

Environmental and ESG Regulatory Shifts

Brazil’s 2025 General Environmental Licensing Law streamlines project approvals, while the EU-Mercosur deal ties market access to Paris Agreement compliance and anti-deforestation measures. These evolving ESG standards will affect investment decisions, supply chains, and compliance costs for international businesses.

US-China Trade Tensions Escalate

The US has imposed a 25% tariff on countries trading with Iran, directly targeting China, Iran’s largest oil buyer. This move risks reigniting the US-China trade war, disrupting global supply chains, and increasing costs for multinational businesses. China’s response and supply chain rerouting are already evident, with US-China trade down 28-38% in 2025 and Southeast Asia gaining share.

Infrastructure And Energy Sector Strains

Despite vast oil and gas reserves, Iran faces energy mismanagement, rolling blackouts, and water shortages. Infrastructure decay and unreliable utilities disrupt industrial operations, logistics, and supply chain reliability for domestic and foreign businesses.

Geopolitical Frictions and Technology Partnerships

Diplomatic disputes, such as with Taiwan, and South Africa’s assertive foreign policy stance create uncertainty for technology and industrial cooperation. Pragmatic engagement with global tech leaders is essential for advancing digital infrastructure and maintaining competitiveness in advanced manufacturing.

Regulatory Modernization and Market Governance

Recent reforms have simplified foreign investor access, eliminated complex qualification barriers, and improved market transparency. However, challenges persist around regulatory clarity, governance standards, and foreign ownership limits, requiring ongoing attention from international investors and partners.

Sanctions, Compliance, and Regulatory Risk

US and EU sanctions related to defense procurement, financial transactions, and Turkey’s dealings with sanctioned states (e.g., Venezuela, Russia) create compliance challenges. Businesses must navigate evolving regulatory frameworks and potential secondary sanctions exposure.

Energy Transition Faces Supply Constraints

France’s accelerated shift to electrification and decarbonization is challenged by hardware shortages, grid bottlenecks, and mineral dependencies. Energy supply tensions and infrastructure delays threaten industrial competitiveness and reliability for international operations.

Geopolitical Risks in East Asia

Rising military tensions over Taiwan and the Senkaku Islands, with Chinese naval activity and Japanese security commitments, increase the risk of regional conflict. This instability directly affects trade, investment flows, and the strategic calculus of multinational firms operating in Asia.

Strategic Export Controls and Technology Restrictions

China has prioritized export controls on dual-use goods and sensitive technologies, targeting countries like Japan and reviewing foreign acquisitions. These measures, aimed at protecting national security, increase compliance risks and uncertainty for multinational firms operating in or sourcing from China.

Regulatory Reforms and Investment Climate

Egypt accelerated regulatory reforms in 2025, including tax law updates, IP system overhaul, and personal data protection laws. These changes aim to attract foreign investment, improve compliance, and foster innovation, but implementation and enforcement remain business concerns.

Energy Sector Expansion and Regional Integration

Major investments in natural gas infrastructure, such as the Leviathan field expansion and long-term export deals with Egypt, position Israel as a key regional energy supplier. These developments support energy security and export revenues but are exposed to regional tensions and shifting global energy markets.

Manufacturing Incentives and Domestic Value Addition

India’s 2026 budget and ongoing reforms focus on boosting domestic manufacturing, scaling up PLI schemes, and increasing value addition in sectors like semiconductors, EVs, and renewables. These measures aim to position India as a global manufacturing hub and reduce vulnerability to external shocks.

Regional Energy Partnerships and Gas Hub Role

Egypt is leveraging its infrastructure to become a regional energy hub, signing supply and cooperation agreements with Israel, Cyprus, Qatar, and Syria. These partnerships support energy security, regional integration, and cross-border investment, but depend on stable infrastructure and geopolitical conditions.

Energy Transition and Nuclear Expansion

France’s €52 billion commitment to new nuclear reactors underscores its strategy for energy security and decarbonization. However, hardware shortages, dependence on Asian imports, and rising energy nationalism across Europe create operational and investment uncertainties for energy-intensive industries and infrastructure projects.

Labour Market and Skilled Migration Initiatives

Germany is addressing labour shortages through new mobility and skills agreements, notably with India. Visa facilitation for Indian professionals and expanded vocational training partnerships are designed to attract talent and support economic growth in key sectors.

Regional Alliances and Diplomatic Realignment

China’s trade actions test US and South Korean support for Japan, reshaping East Asian alliances. International businesses must factor evolving diplomatic ties and security arrangements into their risk assessments, as regional cooperation and competition directly affect trade and investment flows.

Trade Policy Protectionism and Import Controls

France has suspended imports of certain South American products over non-compliance with EU standards and is pushing for stricter border controls. This signals a more protectionist stance, increasing compliance costs and uncertainty for international suppliers and food sector operators.

Labor Reforms and Cost Pressures

Mexico’s 2026 labor reforms include a 13% minimum wage increase, mandatory social security for platform workers, and a proposed reduction of the workweek. These changes raise labor costs and compliance requirements, affecting competitiveness and supply chain strategies.

Supply Chain Diversification and Upgrading

Vietnam is strengthening its position as a global supply chain hub, attracting high-tech and electronics investment, and benefiting from supply chain shifts out of China. Industrial zones like Amata City Phu Tho and Ho Chi Minh City’s high-tech focus drive this trend, but infrastructure, skilled labor, and ESG standards are critical challenges.

Infrastructure Expansion and Urban Development

Major infrastructure projects, including transport and power grid upgrades, are driving economic growth and urban transformation. Hanoi’s record budget revenue and full disbursement of public investment funds highlight the government’s commitment to sustainable development and improved business environment.

Centralized Leadership and Policy Continuity

Vietnam’s Communist Party, under To Lam’s likely continued leadership, is consolidating power and driving ambitious reforms. This centralization ensures policy stability for investors but raises concerns about checks and balances, impacting governance and business predictability.

Political Instability and Security Risks

2025 was Pakistan’s deadliest year in a decade, with over 3,400 killings and violence up 34%. Persistent instability, especially in Khyber Pakhtunkhwa and Balochistan, increases operational risk, disrupts logistics, and raises costs for international businesses, particularly in energy, mining, and infrastructure.

Regulatory Uncertainty and Compliance Burden

Ambiguous and shifting Chinese export restrictions create compliance challenges for Japanese and multinational firms. Unclear definitions of dual-use items and opaque licensing processes increase operational risks and legal exposure for international business.

Supply Chain Resilience Initiatives

Taiwan is diversifying production locations, notably with TSMC’s US and European expansion, and joint US-Taiwan artillery production. These efforts aim to mitigate risks from potential blockades or disruptions, ensuring continuity for global tech and defense supply chains.

Labor Market Cooling And Automation Trends

US job openings have dropped to multi-year lows, with hiring remaining sluggish despite solid economic growth. Automation and AI adoption may sustain output without significant job creation, impacting wage dynamics, consumer demand, and workforce planning for global firms.

Supply Chain Shifts and Regional Integration

Vietnam’s strategic location and deep integration into RCEP and CPTPP make it a preferred destination for supply chain relocation, especially from China. This strengthens its role in Asian manufacturing but increases exposure to regional competition and geopolitical shifts.

Global Investor Confidence Erodes

The weaponization of trade policy and rising geopolitical brinkmanship are eroding global investor confidence. Uncertainty over tariffs, regulatory responses, and alliance cohesion may deter foreign direct investment and delay strategic business decisions in Finland.

Saudi-UAE Rivalry Disrupts Supply Chains

The intensifying Saudi-UAE competition in Yemen, especially over control of strategic ports and oil-rich regions, risks fragmenting regional alliances and disrupting Red Sea and Gulf supply chains. This rivalry could alter trade flows and increase operational risks for international businesses.

China-Japan Rare Earths Standoff

China’s sweeping export controls on rare earths and dual-use goods to Japan have escalated, threatening up to $17 billion in economic losses and severely disrupting high-tech supply chains. Japanese manufacturers face urgent pressure to diversify sourcing and invest in domestic alternatives.