Investment Climate Reform Imperative

Vietnam remains highly attractive to foreign investors, with 93% of European business leaders willing to recommend it, but administrative complexity still raises costs. Legal overlap, permitting friction, workforce constraints, and infrastructure gaps increasingly shape location decisions as regional competition for quality FDI intensifies.

Defence Spending Creates Opportunities

Rising security threats and higher defence spending are boosting aerospace, munitions, drones, and advanced manufacturing. BAE expects 9% to 11% earnings growth, but delays to the UK defence investment plan mean suppliers still face uncertainty over procurement timing.

Security Risks Shape Operations

Ongoing Russian strikes on civilian and energy infrastructure continue to disrupt production, logistics, insurance, and workforce mobility. For international firms, physical security costs, business continuity planning, and asset protection remain central to market entry, supplier management, and investment decisions.

Japan-Australia Security Integration

Australia and Japan are deepening cooperation across energy, defence, cybersecurity and supply-chain contingency planning, including a A$10 billion frigate program. Stronger bilateral alignment improves strategic resilience but also raises compliance and geopolitical considerations for firms tied to sensitive technologies or defence-adjacent sectors.

SEZ Incentives and Regulatory Reset

IMF-linked reforms are pressuring Pakistan to phase out fiscal incentives under SEZ and technology-zone regimes while tightening export-processing rules. This could reshape investment models for multinational manufacturers, reducing tax advantages, changing domestic sales options and increasing the importance of governance and site-selection discipline.

North American Sourcing Rules Tighten

Roughly $300 billion in tariffed goods are estimated to be reaching the United States annually through rerouting via Southeast Asia and Mexico. Rising scrutiny of transshipment and USMCA rules of origin could reshape regional manufacturing strategies, customs enforcement exposure, and cross-border investment decisions.

Power Constraints Threaten Industrial Growth

Electricity demand from high-tech manufacturing, logistics and data centres is rising faster than grid readiness in key hubs. Businesses face exposure to shortages, transmission bottlenecks and delayed energy projects, making power security, renewable sourcing and direct procurement increasingly important for investment planning.

Critical Minerals Supply Chain Expansion

Australia and Japan expanded critical minerals cooperation with A$1.67 billion in support for projects spanning gallium, rare earths, nickel, cobalt, magnesium and fluorite. This strengthens Australia’s role in strategic supply chains, while creating new investment openings in processing and advanced manufacturing.

China Dependence Reshapes Payments

Russia’s commercial system is becoming heavily dependent on China for settlement, liquidity and trade channels. Trade with China is now conducted almost entirely in rubles and yuan, while CIPS volumes reached 1.46 trillion yuan in March, increasing concentration and counterparty risk.

US-Bound Investment Commitments Expand

Seoul is advancing large strategic investment commitments to the United States, including a $350 billion overall pledge, a $150 billion shipbuilding component, and possible LNG project participation around $10 billion. Firms should track localization incentives, financing terms, and cross-border compliance.

Gas Exports Shift to LNG

Russian LNG exports rose 8.6% year on year to 11.4 million tonnes in January-April, while pipeline gas to Europe dropped 44% in 2025. Businesses face continued gas trade reconfiguration, terminal restrictions, logistical bottlenecks, and shifting exposure across Europe and Asia.

Investment Push Through Plan México

The government is responding with Plan México, including 30-day approvals for strategic projects, a foreign-trade single window, tax-certainty measures and 523 billion pesos in highway projects. If implemented effectively, these steps could reduce delays and improve project execution for investors.

Critical Minerals Supply Chain Sovereignty

Paris launched a national rare-earths plan to reduce dependence on China, which controls 60%-70% of mining and 80%-90% of refining and magnet production. New recycling, refining and guarantee schemes should strengthen French and European EV, aerospace and electronics supply resilience.

Trade Caution in EU-US Relations

Paris is pressing for safeguards before ratifying the EU-US trade deal, including conditional tariff removal and an expiry clause. This signals a more defensive French trade posture, adding uncertainty for exporters, steel users, and firms dependent on transatlantic market access rules.

Major Producer Exit Risk

BP’s review of a possible partial or full North Sea exit signals broader portfolio retrenchment risk among international operators. Asset sales potentially worth about £2 billion could reshape partnerships, contracting pipelines, employment, and medium-term confidence in UK upstream gas investment.

Hormuz shipping and energy shock

Strait of Hormuz instability is raising freight, fuel and insurance costs for Israeli companies and importers. Higher oil and LNG prices, shipping delays and rerouted maritime traffic amplify inflation, pressure industrial input costs and complicate procurement, export scheduling and supply-chain resilience planning.

Oil Export Disruptions Deepen

Ukrainian strikes on Russian ports and refineries cut April oil production by 300,000-400,000 barrels per day and reduced March revenues by at least $2.3 billion. Energy traders, shippers and buyers face heightened supply volatility, insurance uncertainty and disrupted Black Sea and Baltic flows.

Fiscal Expansion and Budget Strains

Berlin’s 2027 budget points to €543.3 billion in spending, €110.8 billion in new debt, and higher defence and infrastructure outlays. While supportive for construction, logistics, and industrial demand, rising interest costs and unresolved gaps increase medium-term tax, subsidy, and policy uncertainty.

Sanctions Escalation and Compliance

The EU’s 20th sanctions package broadened export, banking, crypto, LNG and shipping restrictions, including 60 new entities and 632 shadow-fleet vessels. Cross-border firms face higher compliance costs, stricter due diligence, and greater secondary-sanctions exposure through third-country intermediaries.

Higher inflation and rate risk

South Africa remains highly exposed to imported energy shocks. Inflation rose to 3.1%, fuel price growth is projected at 18.3% in the second quarter, and markets increasingly expect tighter monetary policy, pressuring consumer demand, financing costs and operating margins.

Currency, Inflation, and Rates

The Central Bank expects headline inflation to average 17% in 2026, after April urban inflation eased to 14.9%. A weaker pound, costly imports and high interest rates complicate pricing, procurement, hedging and consumer demand for foreign investors and operators.

China-Centric Trade Channel Exposure

More than 80% of Iran’s shipped oil is reportedly destined for China, with Kpler estimating 1.38 million barrels per day in 2025. This concentration heightens vulnerability to US-China frictions, refinery sanctions, payment bottlenecks, and sudden disruptions across energy and petrochemical supply chains.

Industrial and mining scale-up

Saudi Arabia is expanding manufacturing, mining, and local-content policies, with estimated mineral wealth rising to 9.4 trillion riyals, industrial investment reaching about 1.2 trillion riyals, and logistics upgrades supporting deeper domestic value chains and import substitution.

Digital Infrastructure Expands Beyond Java

Indonesia’s digital economy is attracting data-center investment, supported by AI demand, cloud expansion, and personal-data rules emphasizing sovereignty. New projects in eastern Indonesia and Batam aim to improve redundancy, but power availability, connectivity, green energy, and skilled labor remain key operational constraints.

Energy Capacity and Policy Constraints

Electricity availability and policy remain central constraints for industry. The government is speeding permits, targeting renewables’ share to rise from 24% to at least 38%, and reviewing 81 projects, but manufacturers still face concerns over reliable power access.

Energy Shock and Inflation

Higher oil prices linked to Middle East disruption pushed April inflation to 2.89%, with officials warning it could exceed 3% in coming months. Rising fuel, freight, and input costs are pressuring manufacturers, transport operators, consumer demand, and margins across Thai supply chains.

Labour Shortages Raise Costs

Russia faces its worst labour shortage in modern history, driven by mobilisation, emigration and defence hiring. Unemployment is near 2-2.5%, labour reserves have fallen by roughly 2.5 million workers, and wage inflation is squeezing margins across manufacturing, logistics, agriculture and services.

Australia-Japan Strategic Investment Shift

Japanese firms are already Australia’s second-largest foreign investors, and new bilateral initiatives span critical minerals, LNG, defense production, cyber, and maritime assets. This widens opportunities for cross-border capital deployment while signaling Japan’s preference for politically reliable partners in strategic supply chains.

Industrial Growth Remains Fragile

Germany’s macro backdrop remains weak, with government growth expectations around 0.5% and economists warning that further trade escalation could trigger recession in 2026. Soft industrial output and low resilience make external shocks more damaging for investors and operators.

Export Demand Weakens Sharply

German exports to the United States fell 21.4% year on year in March and 7.9% month on month to €11.2 billion. Weaker US demand and a stronger euro are reducing competitiveness, pressuring sales forecasts and inventory planning.

Myanmar Border Trade Reopens

The reopening of a key Myanmar-Thailand bridge after months of closure should revive cargo movement, services, and local commerce. However, martial law in parts of Myanmar still leaves cross-border trade, route security, and supply-chain predictability vulnerable to renewed disruption.

Municipal governance and water stress

Dysfunctional municipalities remain a binding constraint on business activity, affecting roads, utilities and permitting. Nearly half of wastewater plants are not operating optimally, over 40% of treated water is lost, and new PPP-style financing is being mobilized to address gaps.

Political Sensitivity to Social Backlash

The government is increasingly constrained by risks of social unrest tied to living costs and fuel prices. Concerns over a renewed ‘yellow vests’-style backlash raise the probability of ad hoc subsidies, tax debates and abrupt policy shifts affecting transport-intensive sectors.

Food Price Distortions and Imports

Rice inventories reached about 2.7 million metric tons, up nearly 54% year on year, as high domestic prices curbed demand and encouraged imported substitutes. The swing underscores consumer stress, agricultural policy distortions, and shifting sourcing patterns for food retailers and restaurants.

Food Security and Import Exposure

Heavy dependence on wheat and agricultural inputs remains a strategic business risk. Egypt needs 8.6 million metric tons of wheat for its subsidized bread program in 2026/27, while the state is intervening in fertilizer markets to stabilize domestic supply and prices.

Renewables And Green Hydrogen Push

Egypt is accelerating renewable manufacturing and green hydrogen projects, including wind-turbine localization and the Obelisk ammonia venture. This supports long-term industrial decarbonization and export potential, but investors must still monitor execution risks around financing, infrastructure, water supply, and offtake.