The Baku–Tbilisi–Kars Corridor is being relaunched at full capacity

1. In early June, one of the most significant railway investments in the Eurasian region entered a new operational phase, following the completion of modernization work on the 180-km Marabda–Kartsakhi section—the part of the railway that crosses Georgia—and the construction of a bogie-changing terminal using state-of-the-art European technology and equipment.

2. Of the total length, 153 km of existing railway track has been modernized, and a section of over 30 km is a completely new line, built to European gauge, connecting the towns of Akhalkalaki and Kartsakhi in southern Georgia with the border of Turkiye.

3. Akhalkalaki is the main railway hub of the Baku–Tbilisi–Kars project. This is where the transshipment terminal is located, where freight is transferred between the 1,520 mm gauge and the 1,435 mm gauge. Kartsakhi is situated right on the Georgian-Turkiye border, and this is where the new section built for the BTK project begins, connecting to the Turkiye railway network toward Kars.

4. Modernization work on the Georgian section of the Baku–Tbilisi–Kars railway corridor was carried out in five stages, from Marabda to Kartsakhi, including the development of the logistics and railway complex at Akhalkalaki. As part of the project, 13 stations, 55 bridges, eight traction substations, and over 320 buildings and engineering structures were modernized, while new snow protection facilities, nearly 18 km of catenary, and modern train operation facilities were also constructed.

5. Following the completion of the works in Georgia, the Baku–Tbilisi–Kars corridor was reopened at full capacity, strengthening the role of the Middle Corridor as a strategic alternative for freight transport between Asia and Europe.

CPO Mass Production Bottleneck: Single-Chip Testing Exceeds 100 Seconds, Equipment Giants Race to Fill the Gap

1. As AI data centers' computing power demands continue to climb, traditional copper interconnect technology is approaching its physical limits. Co-packaged optics (CPO) is being touted as a key interconnect solution for next-generation AI infrastructure. However, just as Taiwan Semiconductor Manufacturing Co. (TSMC) prepares to mass-produce chips using its COUPE platform in 2026, a long-overlooked step in the process is becoming a critical bottleneck across the entire supply chain: testing.

BNM Publishes Annual Report 2025, Economic and Monetary Review 2025, and Financial Stability Review for Second Half 2025

1. Bank Negara Malaysia (BNM) today released its Annual Report 2025 (AR 2025), Economic and Monetary Review 2025 (EMR 2025), and Financial Stability Review for Second Half 2025 (FSR 2H 2025).

2. AR 2025 highlights BNM’s key initiatives in the past year in discharging its mandates to promote monetary and financial stability conducive to the sustainable growth of the Malaysian economy. The report also provides an account of the broader central bank operations. Meanwhile, EMR 2025 provides BNM’s economic assessments and forecasts, covering economic and monetary developments in 2025 and the outlook for 2026. The FSR is a biannual publication which details BNM’s assessment of domestic financial stability risks and outlook. Highlights of the reports. 

Building the Energy Resilience ASEAN+3 Needs

1. Energy systems across ASEAN+3 (the Association of Southeast Asian Nations, plus China, Japan, and Korea) are under increasing strain. Climate shocks are threatening infrastructure and supply. The rapid expansion of AI and digital infrastructure is driving a surge in electricity demand. And geopolitical tensions are adding new volatility to global energy markets.

2. Although the region is more resilient to energy shocks than in the past, these forces are creating new challenges for macroeconomic stability. Climate change is no longer only an environmental issue. It is increasingly testing energy systems – including power generation, fuel supply chains, and electricity networks – with far-reaching effects on the broader economy.

Governments Must Focus on Spending Better, Not More

1. Finance ministries across ASEAN+3 face mounting pressures from aging populations, climate adaptation, rapid technological change, infrastructure upgrades and in some cases national security—while grappling with rising debt service burden.

2. With large tax hikes politically unpalatable and broad spending cuts threatening growth and social cohesion, policymakers are shifting focus from spending more to spending better.

3. Making spending more productive begins with better allocation, effective implementation, and robust institutions to support this process.

Shock and Resilience: ASEAN+3 and the Conflict in the Middle East

1. The US–Israel military operation against Iran that began on 28 February 2026 has triggered the most significant disruption to global energy markets since 2022. At the time of writing, the Strait of Hormuz – through which roughly a fifth of global oil and liquefied natural gas (LNG) trade normally flows – has been effectively closed to commercial shipping. Oil prices have surged well above pre-conflict levels and remain elevated and volatile.

2. For ASEAN+3, which sources over a third of its oil and gas from the Middle East, the exposure is direct. The risks – higher energy import bills, pass-through to inflation, and potentially tighter financial conditions – should not be understated.

3. Based on AMRO’s internal estimates, if oil prices remain elevated at around USD 90 per barrel for the remainder of the year, inflation in the region could increase by an additional 0.7 percentage points, and growth reduced by 0.2 percentage points.

4. But this is not the 1970s. Nor even 2022. ASEAN+3 enters this episode from a position of strength – in its macroeconomic conditions, the policy space available to respond, and in how the structure of its economies has changed.

Malaysia: Leveraging the Investment Upcycle for Durable Growth Amid Geoeconomic Fracturing

1. The Malaysian economy has demonstrated notable resilience despite rising global trade protectionism and geopolitical tensions. Robust electronics exports and AI-related investment have supported growth, reflecting Malaysia’s entrenched position in global semiconductor and electronics value chains and its gains from the ongoing global tech upcycle. 

2. Political stability as well as policy clarity and credibility have reinforced investor confidence. Sustaining this investment momentum will require preserving macroeconomic and financial resilience, deepening domestic capabilities, and strategically positioning Malaysia as a trusted hub amid geoeconomic fracturing.

3. This preliminary assessment follows AMRO’s Annual Consultation Visit to Malaysia from January 26 to February 6, 2026. The mission was led by Lead Economist Kian Heng Peh. AMRO Director/CEO Yasuto Watanabe and Chief Economist Dong He participated in the policy discussions and met with Bank Negara Malaysia (BNM) Governor Dato’ Sri Abdul Rasheed Ghaffour and Deputy Minister of Finance Liew Chin Tong.

ASEAN+3 Region Expected to Grow at 4.0 Percent in 2026, External Uncertainty Remains Elevated

1. AMRO today released its quarterly update of the ASEAN+3 Regional Economic Outlook (AREO). It estimates the ASEAN+3 economy to have grown by 4.3 percent in 2025, and projects growth to moderate to 4.0 percent in 2026. Inflation is estimated at 0.9 percent in 2025 and projected at 1.2 percent in 2026, remaining below the region’s long-run average.

US will be exempt from global tax deal targeting profits of large multinationals

1. Nearly 150 countries have agreed on a landmark plan to stop large global companies shifting profits to low-tax jurisdictions, but the US will be exempt from the deal, angering tax transparency groups.

2. The plan, finalised by the Organisation for Economic Cooperation and Development, excludes large US-based multinational corporations from the 15% global minimum tax after negotiations between the Trump administration and other members of the G7.