Policymakers must continue to be alert and responsive to both the opportunities and the challenges of globalization if DMCs are to continue to capitalize on the process. This section has two major themes. The first is that development strategies should be modified both to adapt to a changing global economic environment and to take advantage of the opportunities that come with globalization. The Asian development approach, emphasizing rapid technology transfer to create export industries was, and is, quite successful. The second theme is that there are also risks to a globalization strategy and policies must be formulated to minimize them.
Greater volatility is probably the biggest risk that accompanies globalization.
The section discusses ways to reduce the volatility in economic performance that has been associated with globalization. These include policies to monitor and regulate capital flows, develop an appropriate exchange rate regime, and minimize fluctuations in productivity and investment. The section ends with a review of social programs that can minimize the impact of volatility on the poorest groups in society. The third section, Institutional Options in a Globalizing Environment, deals with mechanisms for bringing about institutional change in a globalizing world. Institutional changes are slow to take root because they are often subject to strong forces of inertia.