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Across a number of emerging markets, the coming year will mark a consequential political

transition. This could ultimately prove much more important that the U.S. Federal Reserve's
scheduled tapering in early 2014, which is expected to precipitated further capital outflow
from emerging markets towards center-economies. After all, a relatively steady political
leadership, founded upon pro-market macroeconomic policies and a moderate brand of
politics and foreign policy, has anchored much of the recent economic gains across rapidly
growing economies.
In India, which is among the most important emerging markets of the 21st century, the
coming months will almost certainly mark a change of hands at the apex of political
leadership, with Narendra Modi of the Bharatiya Janata Party (BJP), India's main
opposition party, expected to end decades of Congress party hegemony. For big businesses,
Modi represents a new economic model, which combines populism and tough-minded
structural reform -- ingredients, which they believe could revive economic fortunes of
India. In the words of the Economist, Modi "implements the policies he promises," and is
seen capable of translating his rising political capital into "banging heads together,
rationalizing Byzantine procedures and making rules predictable" on the national level.
Moreover, he could use "his oratory and force of personality" to clamp down on corruption,
which is threatening the country's democratic institutions and economic trajectory.
In Indonesia, a country I recently visited with much enthusiasm, the youth and the broader
electorate is teeming with millennial excitement over the prospects of a new president in
Joko Widodo. Affectionately known as "Jokowi," Jakarta's new governor is truly a breath of
fresh air. He is a promising leader with the utmost integrity -- something that Indonesia,
suffering from leadership deficit and endemic corruption, has been desperately looking for.
However, it remains to be seen whether he will stand as the standard-bearer of the main
opposition party, Indonesian Democratic Party -- Struggle (PDIP). Based on my
conversations with Indonesian academics and analysts, Jokowi is almost certain to become
the next Indonesian leader, should he be able to represent a major political party. As Pankaj
Mishra notes, Jokowi potentially represents a new breed of economics in oligarchic
Indonesia, given his track-record of favoring "bottom-up" politics, streamlining business
licensing, supporting small merchants and indigenous crafts, and prioritizing "small-food-
cart owners over global convenience store chains and shopping malls" in the Central
Javanese city of Solo, where he previously served as a stellar mayor.
In Turkey, widely seen as Middle East's economic miracle, Prime Minsiter Recep Tayyip
Erdoan is expected to contest the presidential elections, but he is facing stiff opposition
from the laic right, progressive left, and even the Islamist right. Amid a flurry of corruption
scandals, which has rocked his cabinet, a growing number of people, including former
members of the ruling Justice and Development Party (AKP), are asking for his resignation.
With Turkey entering a renewed period of political uncertainty, its weakening currency,
jittery capital markets, and wobbly economy are coming under growing pressure. Whether
he wins the presidency or not, Turkey is set to enter an era of contentious politics.
In contrast, the Philippines, Southeast Asia's new growth pole, is not expecting any
leadership transition up until 2016, when the country's powerful elites -- in absence of any
genuine mainstream party -- will start negotiating the roster of competing candidates.
Despite the devastation wrought by super-typhoon Haiyan, the Philippines is expected to
grow at above 6 percent in 2014. Post-crisis reconstruction, with a price tag of $8.17 billion,
will further buoy an already booming economy. By most estimates, inflation is expected to
stay at around 2-3 percent, while the Philippine Central Bank (BSP) will most likely
maintain its current interest rates for much of 2014. This means a steady upward trend in
consumption, real estate, and domestic investments. The economic engines will continue to
roar, but the real challenge lies once again in the country's whimpering political institutions.
Three years into his widely-hailed presidency, with much of the media and pundits lavishing
praise on him, Benigno Aquino is finally feeling the heat. Recent monthshave been a
difficult period for the country, with a stream of corruption scandals, disasters, and
(alleged) oligarchic collusion in the electricity sector capturing the political imagination of
an increasingly energized middle class. Thus, the demand for steadfast, proactive leadership
has risen in proportion.
But many are asking: Is Aquino up to the task?
The New Political Normal
Ramon Casiple, among the country's most respected political commentators, recently went
as far as criticizing Aquino for his "stubbornness," which is increasingly "turning into a
political death wish." For him, the president has failed to demonstrate optimal leadership
on almost all major developments in recent months, due to his "condescending or evasive
For the chattering classes, Aquino didn't show the kind of decisiveness they expected him to
display on, among other things, abolishing the much-derided legislative pork barrels and
clamping down on regulatory capture in strategic economic sectors. With declining
popularity, some critics feel that Aquino has resorted to cantankerous retorts, insularity,
and defensiveness. Many wonder where is the easy-going, self-confident leader, who
combined moralistic conviction with the promise of genuine change back in 2010.
While the president's opponents are expected to make the most out of the recent uproar,
many middle class Filipinos as well as progressives, however, continue to hope for a change
in Aquino's predisposition. After all, some supporters see him as the best president in
decades, although the bar is quite low, who initially managed to bring much-needed
stability, predictability, and integrity to state institutions.
After years of historic-high approval ratings, Aquino will have to grapple with a more critical
public, less benefit of the doubt on the part of chattering classes, and a whole host of
challenges, which were absent in the first half of his term in office. But, quite paradoxically,
it is precisely such challenging moments, which could prove the mettle of Aquino's
leadership -- and his willingness to place his country on a path to democratic maturity and
economic dynamism.
The Real Challenge
Although the economy is poised for long-term expansion, it is far from certain whether the
whole country's fortunes will genuinely change for the better. There are still tens of millions
of people suffering underemployment and poverty. The services sector has become the
engine of growth, but its fruits are swallowed by the tiny, mostly-privileged sectors of the
society. Much of the underprivileged and poor can't expect jobs until the manufacturing and
agricultural sectors are revived. They can't expect affordable healthcare, water, and
electricity, unless the government prevents regulatory capture, streamlines the labor
markets, and judiciously subsidizes strategic economic sectors. So far, there hasn't been any
major move on this front.
It would be unfair to expect a single person to overcome age-old problems. But Aquino has
himself to blame for oversized expectations among the populace. He has consistently
promised change, emphasized his commitment to reform, and claimed all the credit for any
major breakthrough. So obviously, whenever anything goes wrong, or things don't change as
fast as they should, people will blame him. Against this backdrop, Aquino's recourse is, first,
to revise his PR strategy: He has to show more humility, accept his shortcomings, and, as
John F. Kennedy eloquently put it, tell the Filipino people to "ask not what your country can
do for you, [but] ask what you can do for your country."
Political leadership in the 21st century is about building robust institutions, delegating tasks
to capable agents, and displaying conviction in face of numbing challenges. "Our
government -- any government, any organization -- is the sum of the human beings who
operate it, who bring with them all their faults, foibles, and frailties, and all of their
creativity and cleverness," Jake Sullivan, among America's most gifted
bureaucrats, told students at the University of Minnesota in 2012. "[Public policy] is a study
in imperfection."
In short, it is not too late for the Aquino administration to turn the tables. But it will have to
display both humility and a herculean effort at ensuring inclusive economic growth,
preventing regulatory capture in crucial sectors such as electricity, and staying true to its
promise of decisive reforms in the country's state institutions. Otherwise, he will be
dismissed as a passive actor amid the changing fortunes of his country. The long-term
economic trajectory of the country will certainly depend on the actions of the Aquino
administration in its remaining years in office, although it will have to contend with a more
contentious political landscape. Market watchers, meanwhile, should also start taking notice
of the Philippines' fluid political landscape if they wish to truly understand the country's
economic future.