My guess is that in a country with under developed institutional arrangement, regional competition is particularly helpful. If region A is getting too unreasonable in terms of policy, taxation and corruption, investors can shift to region B instead. In other words, the regional competition can, to a certain extend, serves as a powerful tool to reduce ‘crazy practices’, including corruption. In the long run, to strengthen the institutional arrangement (i.e. delineation and enforcement of property rights) is still inevitable.