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.

What are Small Modular Reactors (SMRs)?

1. Small modular reactors (SMRs) are advanced nuclear reactors that have a power capacity of up to 300 MW(e) per unit, which is about one-third of the generating capacity of traditional nuclear power reactors. SMRs, which can produce a large amount of low-carbon electricity, are:

• Small – physically a fraction of the size of a conventional nuclear power reactor.

• Modular – making it possible for systems and components to be factory-assembled and transported as a unit to a location for installation.

• Reactors – harnessing nuclear fission to generate heat to produce energy.

Finance can put trade at risk, leaving the global economy 'on the brink' – with developing countries hardest hit

 1. A new UN Trade and Development report says reforms to global financial systems are key to reducing vulnerability, improving predictability and supporting stronger alignment between trade, finance and development.

2. Global growth will slow to 2.6% in 2025, down from 2.9% in 2024, as global trade and investment face growing pressure from financial volatility and geopolitical uncertainty, according to UN Trade and Development’s new “Trade and Development Report 2025: On the Brink – Trade, finance and the reshaping of the global economy”. The report shows that shifts in financial markets move global trade almost as strongly as real economic activity, influencing development prospects worldwide.

3. UN Trade and Development (UNCTAD) Secretary-General Rebeca Grynspan said the findings show how financial conditions increasingly determine the direction of global trade: “Trade is not just a chain of suppliers. It is also a chain of credit lines, payment systems, currency markets and capital flows.”

Malaysia: National Semiconductor Strategy to Secure Global Position

 1. Malaysia is working to strengthen its role in the global semiconductor sector by diversifying supply chains and maintaining investor confidence amid trade uncertainties. The country’s approach is being shaped by the National Semiconductor Strategy (NSS), which aims to enhance resilience in an industry increasingly influenced by geopolitical and economic shifts.

2. The NSS reflects Malaysia’s ambition to position itself, alongside neighbouring economies such as Singapore and Vietnam, as a vital link in the global technology supply chain. The emphasis is on creating a more robust and flexible framework for semiconductor production and trade, moving away from the older reliance on single-sourced operations.

ETSI Launch Positions Malaysia As Regional Semiconductor Hub

 1. Collaborative Research in Engineering, Science & Technology (CREST) and the Human Resource Development Corporation (HRD Corp) have launched the Engineering Talent for Semiconductor Industry (ETSI) Programme, a flagship initiative to strengthen Malaysia’s semiconductor capabilities.

2. The programme, aligned with the National Semiconductor Strategy (NSS) and anchored by the Ministry of Investment, Trade and Industry (MITI) and the Ministry of Human Resources (KESUMA), aims to develop a holistic talent pipeline spanning students, graduates, the existing workforce and researchers. It seeks to equip participants with critical skills across the semiconductor value chain to boost R&D, innovation and Malaysia’s competitiveness in the global E&E sector.

3. ETSI includes four key programmes: structured internships for students, job-ready training for graduates and the unemployed, reskilling and upskilling of the current workforce and access to CREST’s Semiconductor Centre of Excellence (CoE) for advanced training and R&D. The programme is designed to nurture homegrown engineers, facilitate knowledge transfer and strengthen industry–academia linkages.

Malaysia Industrial Property Outlook 2025: A Stable Market Driven by Strong Construction Activity & Investor Demand

 1. The industrial property segment continues to be the strongest performer in Malaysia’s real estate market for 2025. Based on NAPIC’s Q1, H1, and Q3 2025 snapshots, the data shows a healthy industrial pipeline, stable demand, and sustained construction activity—even as other sectors like residential and serviced apartments face oversupply challenges.

Global FDI falls, but the digital economy continues to grow – report

1. According to the latest World Investment Report from UNCTAD, global foreign direct investment (FDI) saw an overall increase of 4% in 2024. However, when excluding financial flows through European conduit economies, FDI actually decreased by 11% during the same year.

2. The report also notes the importance of the digital economy, which has grown significantly since 2020, tripling its value to $360bn. The report notes that this growth risks exacerbating inequalities, given that it is highly concentrated in certain countries.

3. While UNCTAD had mentioned the possibility of modest growth in 2025 earlier in the year, it changed its outlook to negative due to high investor uncertainty. It cites “geopolitical tensions and industrial policy goals” as strongly influencing global investment decisions, as well as high borrowing costs and exchange rate volatility.

The Challenges and Outlook for BESS Developments in Malaysia

1. The Malaysian National Grid and power systems face numerous challenges in the coming years with an expected rise in electricity load and the integration of more renewable energy (RE) sources. Specifically, Malaysia has set RE capacity targets of 31 % and 40 % by 2025 and 2035, respectively, which will be primarily supported by solar (PV), mini-hydro and biomass.

Is manufacturing making a comeback in the US?

1. When Rosemary Coates, executive director of the nonprofit Reshoring Institute, worked as a supply chain consultant for large companies in the 1990s and early 2000s, the CEOs would invite her into their offices and say, “Just get me to China.”

2. “‘We know it’s cheaper. Our competitors are doing it. It’s what we should do. Let’s just go to China,’” Coates recounted at the Women in Manufacturing Summit in Chicago on Oct. 13. “There wasn’t a whole lot of thought to it. Some may be financial analysis, but by and large, it was simply the strategy to go forward.” 

3. Cut to the 2012 election, before which then-President Barack Obama and presidential candidate Mitt Romney debated over China’s trade practices and bringing jobs back to the United States, or “China bashing.”

4. “They were both saying, ‘It’s all China’s fault. The economy has all gone downhill because of China,’” Coates said. “This is what I was doing for a living, outsourcing, closing plants and factories in the U.S. and pushing all this manufacturing to China.”

5. The debate then had CEOs talking about the potential for reshoring, asking her, “Is it even possible to bring manufacturing back? Can we do it?”

6. Coates then decided to pivot and focus on helping rebuild, reevaluate and find ways to bring manufacturing back to the U.S. by establishing the Reshoring Institute in 2014.

7. So can manufacturing make a comeback? The answer is yes and no, Coates said.

8. “Brace yourself. [Change is] coming if it isn’t already here,” Coates said. “And you need to learn to be flexible and accept that and look to the future.” 

ASEAN+3 in a Fragmenting World

 1. The rules-based multilateral trading system—long the cornerstone of global economic integration and prosperity—is being challenged by the Trump Administration’s unilateral protectionist policy. Rising protectionism, selective trade measures, and weaponization of tariffs are eroding the foundations of the rules-based global trade order. These developments not only jeopardize the economic gains accumulated over decades of globalization but also threaten the stability and prosperity that open trade has long supported across regions.

2. The growing uncertainty has clouded business confidence and undermined investment decisions. Firms in both advanced and emerging economies are rethinking their long-term investment strategies, delaying or canceling plans and redirecting capital in response to fears of abrupt regulatory shifts or market disruptions. Global supply chains, once optimized for cross-border efficiency, are now being reshaped around redundancy, resilience, and protectionism.

3. Amid this flux, the need for a reliable anchor for global trade has rarely been more urgent.

China’s EVs dominate the world — why not in the US and Canada?

1. China makes more than 70 percent of the world’s electric cars. But it’s hard to find those vehicles in North America. One month before he opened this year’s United Nations climate summit, Brazilian President Luiz Inacio Lula da Silva helped open a new mega-factory at the site of a former Ford car manufacturing plant.

2. The new plant, in Brazil’s Camacari, Bahia, is one of many being built around the world by China’s BYD, the world’s largest manufacturer of electric cars. BYD’s presence is also being felt at the ongoing COP30 climate summit in Brazil’s Belem, where it is a cosponsor alongside GWM, another Chinese electric carmaker.

3. The sponsorship is just one of many ways that China’s investments in green technology are being felt at the UN’s top climate meeting, where the Chinese official delegation of 789 people is second only to Brazil’s 3,805.

4. Back in the US, and in neighbouring Canada, trade barriers aimed at punishing Chinese electric vehicles have made them far costlier than what the manufacturers want to sell them for. These tariffs are a legacy of former US President Joe Biden’s administration, and place North America as an outlier at a time when Chinese EVs otherwise dominate the global market.

Tallinn, Estonia named world’s best city for start-ups

1. Tallinn has been named the world’s best city for start-ups in the prestigious Monocle magazine’s 2025 Quality of Life Survey. Making its debut in the rankings, Estonia’s capital received top marks for its advanced digital infrastructure, supportive start-up ecosystem, low cost of living, and inclusive international community, writes Startup Estonia.