Business often succeeds at outwitting the regulators but at the expense of transparent practices that encourage long-term business confidence. Excessive regulation causes profit-seeking firms to break the law. Assaults on illegally accumulated wealth subject business to persistent political uncertainty, and denies business public support or a continuous, open role in policy making. To surmount regulatory uncertainty, business relies on strong personal relationships with politicians. Deals that depend on the right connections, however, can be overturned when a new government appears.
Opposition parties can cite the corruption of the previous government to gain political advantage.
When government changes hands, contracts consummated under one government may be reconsidered. Consequently, property rights are no more secure in democracies of South Asia than in autocracies where the rule of law does not apply and leaders can confiscate the property of citizens at will. Knowing that contracts may not be honored when the government changes, investors entertain long-term investment reluctantly and often require government subsidies or guarantees of monopoly to offset the risk. Government must stay involved in managing the economy to subsidize the large capital expenditures that may be subject to political risk, further crowding out the private sector. When citizens perceive that government cannot credibly commit to the implementation of policies designed to increase economic growth, government loses support, reelection becomes improbable, and questions may even arise concerning the durability of the political system.