For DMCs, late 20 th and early 21 st century globalization is also coinciding with an important change in the sources of economic growth. For the last four decades, DMCs have recorded rapid rates of growth by maintaining high rates of factor accumulation capital accumulation in traded-goods sectors in particular and by selling their products in world markets. But as Asia s high-growth economies mature, the source of their growth will progressively shift from factor accumulation to TFP growth. This will require changes in policies and institutions. Countries like the PRC and India are attempting to implement this strategy.
Competition is intense.
And as more countries compete for foreign investment, their ability to acquire technology via licensing will be correspondingly curtailed. In turn, this will require accelerating the evolution of policies and the renovation of policy-making institutions. That the need for stable macroeconomic policies, sound regulatory arrangements, and good governance is obvious does not make them unimportant. Appropriate policies are easier to prescribe than to implement and their specifics are likely to vary over time as an economy evolves. The first step of a liberalization strategy is replacing nontariff barriers by tariffs.