Why Brexit-Trump combo may act to deter developing countries from Western-style governance

The U.K.'s Brexit vote and the potential election of Donald Trump as U.S. president may accelerate a move in emerging markets (EM) towards Singaporean rather than Anglo-Saxon-style governance, renowned investor Mark Mobius told CNBC.

Men dressed as Donald Trump and Boris Johnson prepare to take part in a tomato fight at the Glastonbury Festival 2016 in England.
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Men dressed as Donald Trump and Boris Johnson prepare to take part in a tomato fight at the Glastonbury Festival 2016 in England.

Mobius, who is executive chairman of Templeton Emerging Markets Group, said major EMs like China were looking to Singapore rather than the West for inspiration — and said the apparent rise in protectionism and rejection of free trade and globalization in developed economies might encourage that trend.

"There is ongoing debate over what model makes sense — the U.S. model or the Singapore model of financial market liberalization with stable one-party government," the Singapore-based investor told CNBC on Wednesday.

Mobius said the financial and political tumult that followed the U.K.'s vote to leave the European Union highlighted the potential for instability in even the most highly developed of Western democracies.

"China is leaning towards Singapore … Russia and Turkey are leaning towards Singapore," he told CNBC.

Under the 31-year leadership of Prime Minister Lee Kuan Yew from 1959 to 1990, Singapore grew from an impoverished backwater to one of the world's most advanced economies. Today, Yew's People's Action Party still rules Singapore and U.S. non-governmental organization Freedom House categorizes the city-state as a "partly free" democracy.

Since 2014, EMs including China, Vietnam, Russia and Kazakhstan have started moving towards floating exchange rate regimes. Some, such as China, are also gradually opening up their stock markets. There are a few signs, however, of a groundswell move towards the political rights and civil liberties espoused by the West, with some EMs, like Turkey, increasingly cracking down on the media and political opponents.

The prospects for the global economy could be gloomy should last week's Brexit vote be followed by the election of presumptive Republican nominee, Donald Trump, as U.S. president, Mobius said on Wednesday.

"A victory for Trump could accelerate the fear factor — of protectionism and so on," he told CNBC, adding that Trump had a "good chance" of winning.

"There may be a general closing up and rejection of free trade and globalization … that is something we have to watch very carefully," Mobius later added.

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