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.

Geopolitical Tensions with US and China

President Macron’s criticism of US sanctions and China’s aggressive trade practices underscores France’s drive for strategic autonomy and regulatory sovereignty. These tensions heighten risks for multinationals in tech, energy, and advanced manufacturing, with potential for retaliatory measures and regulatory divergence.

Growing Dependence on China

As Western markets close, Russia’s trade dependence on China has deepened, with China accounting for 27% of exports and 45% of imports. However, bilateral trade is also weakening, with a 7.6% decline in oil exports and 11% in coal, creating structural vulnerabilities.

Geopolitical Tensions Impact Supply Chains

Export controls, especially U.S. restrictions on semiconductor technology to China, create operational uncertainty for Korean firms. Temporary exemptions for Samsung and SK Hynix highlight ongoing risks to production stability and cross-border supply chain planning.

Nusantara Capital City Development

The government allocated Rp6 trillion for the new capital, Nusantara, focusing on transparent governance and strategic infrastructure. This project attracts global investors, reshapes regional logistics, and creates new opportunities for construction, services, and technology firms.

Escalating Security Risks and Terrorism

Pakistan faces a surge in terrorist incidents, with 71% originating from Khyber Pakhtunkhwa and a 40% rise in violence in 2025. Persistent attacks, especially targeting infrastructure and foreign interests, elevate operational risks for international businesses and supply chains.

Political Stability and Governance

Domestic political dynamics, including government policies and election cycles, impact investor confidence. Political stability is crucial for maintaining a predictable business environment; instability can lead to capital flight and reduced foreign investment.

Aggressive US Industrial Policy Shift

The 2025 US National Security Strategy prioritizes economic, technological, and energy dominance through reindustrialization, energy independence, and strategic subsidies. This shift challenges multilateral norms, risks marginalizing allies, and increases regulatory complexity for international investors and supply chain planners.

Evolving Foreign Investment Climate

China’s M&A market is rebounding, with deal value projected to rise 13% in 2026. Regulatory reforms and improved market conditions are attracting strategic and financial investors, though persistent geopolitical and legal risks require careful due diligence for foreign entrants.

Capital Market Growth and ESG Regulation

Taiwan’s IPO market reached record highs in 2025, driven by semiconductor and AI sectors. New ESG and sustainability disclosure regulations are raising compliance standards, influencing investment decisions and corporate governance for international and domestic firms.

Moderate Economic Growth, High Inflation

Brazil’s economy is projected to grow around 1.7% in 2026, with inflation remaining high at 12-12.75%. Fiscal stimulus and strong agriculture support growth, but high interest rates and external risks require cautious planning for investment and supply chain strategies.

Japan’s Military Buildup Spurs Controls

Japan’s increased defense spending and security policy reforms have prompted China’s export restrictions, raising business risks in sectors linked to defense and advanced manufacturing, and signaling a more volatile regulatory environment for foreign investors.

Stagnant Manufacturing Competitiveness

Thailand’s manufacturing sector, especially automotive and electronics, faces declining output and competitiveness. Despite increased FDI, the country struggles to move up the value chain, risking long-term industrial stagnation and reduced attractiveness for high-tech investment.

Geopolitical Stability

Regional tensions and Saudi Arabia's involvement in Middle Eastern conflicts affect investor confidence and trade routes. Stability in the kingdom is crucial for maintaining secure supply chains and fostering a favorable business environment for international investors.

Labor Market and Work-Life Balance Reforms

Legislation planned for 2026 will reduce excessive working hours and introduce the right to disconnect, aligning with OECD standards. These changes will affect operational costs, productivity, and compliance for international firms operating in South Korea.

Record Foreign Direct Investment Inflows

Turkey attracted $12.4 billion in FDI in the first 11 months of 2025, a 28% year-on-year increase. The EU accounts for 75% of FDI, with key sectors including wholesale, retail, ICT, and food manufacturing, signaling robust investor confidence and sectoral opportunities.

Inflation Slowdown and Cost Pressures

Inflation in France slowed to 0.8% in December 2025, mainly due to falling energy prices. However, persistent price increases in services and food, combined with budget uncertainty, create mixed pressures for businesses and consumers, affecting investment and consumption.

Regulatory Overhaul and NGO Restrictions

Israel’s sweeping regulatory changes in 2026 impose stringent requirements on foreign NGOs operating in Gaza and the West Bank, restricting aid and international staff. These measures heighten compliance risks and complicate humanitarian supply chains for global organizations.

Infrastructure Investment Drives Construction Boom

US infrastructure spending, supported by federal and state initiatives, is fueling robust growth in construction and heavy equipment markets. This trend supports supply chain modernization and creates opportunities for global suppliers, though regulatory and environmental uncertainties persist.

Selective Openness and Strategic Free Trade Zones

The launch of Hainan as the world’s largest free trade port exemplifies China’s approach to selective openness—attracting global capital and technology while maintaining central control. Such initiatives offer new opportunities but also reinforce the need for careful navigation of regulatory and political boundaries.

China's Regulatory Crackdown

China continues stringent regulatory oversight across sectors including tech, education, and real estate. This creates uncertainty for foreign investors and multinational corporations, impacting market valuations and prompting strategic reassessments of China exposure.

Foreign Investment Flows Amid Volatility

Despite rising market volatility and a slight increase in sovereign risk, Indonesia saw Rp1.44 trillion in foreign capital inflows in early January 2026, mainly into equities and securities. Persistent inflows signal continued international investor interest, though bond and currency risks remain.

Fiscal Expansion and Debt Risks

Germany’s fiscal policy has shifted toward massive state spending, with over €850 billion in new debt planned by 2035. Bond markets are reacting with rising yields and shrinking risk premiums, signaling concerns over long-term fiscal sustainability and potential tax or inflation impacts on business operations.

Accelerating Foreign Direct Investment Inflows

Vietnam’s FDI surged 8.9% in 2025, reaching $23.6 billion, driven by high-tech manufacturing and green industries. Continued reforms and digital transformation are attracting global investors, but heavy reliance on foreign capital exposes Vietnam to external shocks and geopolitical risks.

Geopolitical Tensions Shape Strategic Choices

Persistent border militarization and economic interdependence with China, plus regional instability, compel India to compartmentalize security and trade. Strategic diversification of supply chains and partnerships is essential for mitigating risks from global conflicts and maintaining operational continuity.

Financial Sector and FDI Liberalization

India’s financial sector reforms, including 100% FDI in insurance, improved regulatory oversight, and new securities market codes, deepen capital markets and attract global investors. These changes enhance competition, lower costs, and strengthen India’s role as a preferred destination for foreign capital.

Weak Economic Growth and Fiscal Strain

Thailand’s GDP growth is forecast at 1.5–2.0% for 2026, its weakest in three decades. High public and household debt, slow reforms, and political uncertainty threaten credit ratings, investment sentiment, and the government’s ability to stimulate recovery.

Private Equity and Real Estate Investment Boom

Private equity investments rebounded 44% in Q4 2025, while real estate capital inflows hit a record $14.3 billion, up 25%. Foreign and domestic investors are focusing on land, office, and warehousing, signaling robust long-term confidence in India’s growth trajectory.

Escalating Taiwan Strait Tensions

China’s sanctions on U.S. defense firms and increased military drills near Taiwan, in response to the largest-ever U.S. arms sale to the island, have intensified geopolitical risks. This escalation threatens regional stability and global supply chain continuity, impacting cross-border investments.

Foreign Investment Trends and Regulatory Hurdles

Foreign direct investment, especially from Japan, is rising in Australian real estate and infrastructure, driven by housing undersupply and growth prospects. However, complex regulatory processes and development approvals present challenges, requiring strategic navigation for international investors.

Foreign Investment Scrutiny Tightens

Regulatory bodies like CFIUS are rigorously scrutinizing foreign investments, especially in technology, agriculture, and energy. Stricter review processes and new reporting requirements raise barriers and delay cross-border deals.

Supply Chain Diversification Mandates

US policy now ties tariff relief to Taiwanese firms’ US manufacturing presence, incentivizing relocation of up to 40% of Taiwan’s semiconductor supply chain. This shift aims to mitigate concentration risk but challenges Taiwan’s domestic industry and global logistics.

Technological Innovation and Digitalization

Japan is advancing in digital transformation and innovation, particularly in AI, robotics, and 5G technologies. These developments enhance competitiveness but require substantial capital investment and adaptation by businesses, influencing international partnerships and technology transfer agreements.

Energy Security and Diversification Strategy

Turkey’s energy policy emphasizes diversification, with LNG imports from the US and multiple pipeline sources. This reduces vulnerability to Russian supply shocks and positions Turkey as a critical energy transit hub, affecting investment strategies in energy, infrastructure, and manufacturing.

Polarization in Export Competitiveness

While semiconductors and automobiles drive export growth, sectors like steel and machinery face declining global competitiveness due to Chinese competition and EU carbon border measures. This polarization requires targeted innovation and adaptation strategies for affected industries.

Political Stability Concerns

Political tensions and governance challenges, including corruption allegations, impact investor confidence. Political uncertainty can lead to policy shifts and social unrest, increasing country risk premiums for international businesses.