Reform is a pressing need across emerging markets, especially as global demand remains weak and rising US interest rates threaten to increase funding costs. For countries to revive growth, they will need to create a more favourable environment for business. Politicians in many countries acknowledge this and have put structural economic reforms at the heart of their governing agenda.
But everywhere the outlook for reform is heavily dependent on political leadership and the larger political economy: where leadership and popular support for reform is strong – as in India – the outlook is positive; but where politicians are more interested in power than leadership – such as in Turkey and South Africa – the prospects for positive change are dim.
In India, Mexico and Indonesia, charismatic leaders all came to power promising ambitious reforms. In all three countries, ambitions have run up against political realities as leaders discover that implementing change is more difficult than campaigning for it. In some areas, reforms have had to be abandoned, as in the case of land reform in India and fuel subsidies in Indonesia. Nevertheless, the leaders of all three countries are still pressing forward with parts of their agenda, and the outlook for reform is still, on the whole, positive.