This is because countries that follow outward-oriented trade policies generally enjoy higher growth rates. A reduction of barriers to trade tends to increase the demand for relatively abundant factors of production. In the case of Asia, these beneficiaries have been initially unskilled and semi-skilled laborers, that is, those most likely to be poor. Ladies and gentlemen, we all need to be cautious in formulating our response to globalization. Our response should be such that Asian economies benefit from the opportunities that come with globalization, and that they are able to minimize the risks that this process entails.
Greater volatility is probably the biggest risk that accompanies globalization.
Therefore, as economies globalize, they need to stress policies to monitor and regulate capital flows, developing appropriate exchange rate regimes, minimizing fluctuations in productivity and investment, and strengthening social safety nets. One challenge all Asian countries face to varying degrees is the need to alter the basis of their economic growth. As Asia's high-growth economies mature, and they come closer to frontier technology, their sources of growth will need to progressively shift from factor accumulation to improved factor efficiency and innovation. This is because at the frontier of technology, these countries will find it harder to sustain rapid growth by means of high investment in capital goods because it will already be in place in existing technologies. If national governments and the international community work together to implement policies that enable developing Asian economies to take advantage of globalization and minimize risks, growth in the region is sure to increase.