Ronald L. Watts: The following 30 questions and answers deal with issues that Nepal and its Constituent Assembly are wrestling with in the drafting of a new federal constitution. The answers attempt to relate these issues to the positive and negative experiences of federations elsewhere in the world and are based on questions raised during a series of round tables held in Nepal during the period of 22 March – 2 April 2010
1 What is the difference between federal and non-federal countries?
Of some 174 countries in the world today at least 25 are federations. Federalism is not appropriate for every country, but in certain circumstances where there are strong pressures for both unity and diversity it has been used, in a number of countries, and has proved to be an effective mechanism for combining unity and diversity.
There are a variety of federations and a variety of unitary systems, but there is a fundamental difference between the two. In a
unitary system, ultimate sovereignty and law making power resides totally with the central government. The central government may decide to adopt decentralization, but it also has the power to remove or withdraw powers provided to regions. In a federal system, the constitution ensures that no one level of government decides what the powers of different governments will be. Federalism gives guaranteed power to the regional units of government through the constitution, and those powers cannot change without a formal constitutional amendment which requires the consensus of both the federal government and a majority of constituent units. This provides a safeguard to regional units that other levels of government cannot simply take powers away from them. Often in defence of federalism it is argued that being assured of their regional autonomy means that people in those constituent units are willing to remain united.
Federalism does not solve all the problems of a country, but it has proven to work well in practice. The United Nation’s Index of Human Development, which ranks some 174 countries in terms of quality of life based on a weighted average of life expectancy, adult literacy, school enrolment and per capita gross domestic product has consistently ranked four federations among the top ten countries in the world and four others close behind. One might argue that this is because federations such as Australia, the United States and Switzerland are developed countries. However, when they were first established as federations more than a century ago they were themselves third world countries. They have developed over more than 100 years within federal frameworks that have enabled them to prosper. This provides a strong argument for federalism. Nevertheless, federalism is not necessarily appropriate everywhere. For example, Japan – which is a homogeneous society – does not require recognition of multiple ethnic identities. Thus the need for federalism does not exist in Japan, as it does in countries like Switzerland, Canada and India.
2 What are key factors for a sustainable federation?
There are two key factors for the sustainability of a federation. First is a balanced constitutional design. If a federation is to be sustainable it must achieve a balance of the variety of interests within the country. Evidence has shown that this balance is a crucially important feature of federations, as it enables all of the various groups to feel an equal stake in the constitution’s continued operation. There must also be a balance between an effective central government for shared objectives and effective provincial governments giving genuine self-rule at the regional level. The second factor is what can be called a supportive political culture based on public acceptance of the values of federalism. No matter how well designed the constitution is, if the people do not accept the values of federalism (rule of law, compromise, consensus, cherishing of diversity, respect for minorities and tolerance) the federation will not survive. Even after a constitution is adopted, it is very important to develop and encourage that supportive political culture embodying these values.
The theory of federalism is based on the argument that by providing distinct groups with secure regional autonomy over issues that directly affect them and relate to their distinctidentity, unity is improved rather than weakened. If groups are oppressed or do not control their own affairs at the regional or local level, they tend to rebel against the centre and wish to separate themselves, which becomes more problematic for the country. Often in countries transitioning from a unitary system to a federal system there is a fear that this constitutes a first step towards secession. However, in practice federalism is no more a first step towards secession than a unitary system. Indeed, studies of unitary systems reveal a greater number of secessions than in federations. Secession may be the result of failure to recognize the interests and desires of separate diverse groups within a country, and numerous unitary systems have fragmented due to inadequate involvement of diverse regional groups. Nevertheless, federal systems, if not properly designed with an emphasis placed on the importance of shared roles, can lead to secession.
Federal systems, therefore, involve both unity and diversity. Without unity a federation will collapse and disintegrate. It is thus important, that the central institutions be strong enough to be effective and that they provide a place for the various groups of the country to be represented and feel they have a voice in the federation. In most federations there are either written or unwritten rules that in practice ensure the central government represents the variety of groups across the country.
Federalism involves a dynamic process, which requires continuous work throughout the life of a federation. If you examine the history of successful federations, they have existed for long periods and have developed and responded to the changing conditions over time. Once a constitution is adopted in Nepal, its implementation will require continued work. Merely creating a constitution will not solve all the problems; Nepal will have to apply the constitution, develop it and maintain it
Types of Federal Structures
3 Is a multiethnic federation suitable for Nepal?
There are numerous variants of federalism that are possible; however generally speaking there are two basic types of federalism that can be distinguished. These are mono- national or mono-cultural and multinational or multicultural. Considering the ambiguity of the term “nation” (as it is used to refer to both ethnic and civil nationalism) the terms mono- cultural and multicultural will be used here.
Some federations are fundamentally mono-cultural, such as the United States, Germany and Australia. Others contain a variety of ethnic groups and may be called multicultural federations. The latter are more relevant examples for Nepal. Canada and Switzerland are older examples of federations that are commonly referred to as multicultural. Newer examples of such federations include India, Nigeria, Ethiopia, Belgium and Malaysia. These federations are examples of attempts at empowering different ethnic groups within a single federation.
Federations are also created by different processes. Some have involved a process of aggregation – the act of bringing previously separate independent units together. Others have been created by devolution from a formerly unitary system. Those formed by aggregation include examples such as Australia and Switzerland. However, more relevant examples for Nepal are those federations which have been formed by a process of devolution such as Malaysia, Ethiopia, Nigeria, Spain and Belgium or by a mixture of aggregation and devolution, such as Canada and India.
In seeking relevant examples for Nepal, special attention to multicultural federations and federations created by either
devolution or a mixture of devolution and aggregation would seem appropriate. However, this does not mean that important lessons cannot be learned from other types of federations as well. Key examples for Nepal to consider include the experience of Belgium, Canada, Ethiopia, India, Malaysia, Nigeria, South Africa and Spain.
4 Is a centralized or decentralized federation preferable for Nepal?
Amongst the more than two dozen federations in the world, there is an enormous range between those that are centralized and those that are decentralized. Switzerland is the most decentralized federation,with Canada very close. In Switzerland, only 32 per cent of total government expenditures are carried out by the federal government, and 68 per cent are carried out at the canton and commune level. In Canada, only 37 per cent of total government expenditures are carried out by the central government. On the other hand if you examine Malaysia, 84 per cent of expenditures are carried out by the central government, with only 16 per cent controlled by the states. There is clearly an enormous variation among federations between these extremes in the extent of decentralization.
Consequently, there is no single ideal model for the degree of decentralization in a federation. Nepal should not necessarily follow one particular model over another, but rather recognize the wide range of forms and the evolution federations have often experienced throughout the years. Decentralization is a viable option for Nepal; however how much is desirable is another question. The constitution should set up a framework for the country and should not be restrictive to change. It should be designed to create a framework for future development and evolution. Nepal may wish to begin as a relatively centralized federation as the first step away from a unitary system, and evolve over time to a more decentralized system. It is important to remember that federations are not static and can evolve as the country itself develops. Canada for example was formed in large part by devolution from a unitary system and began as a very centralized federation. Over the years it has become increasingly decentralized as it has evolved with changing circumstances
Confusion often arises concerning the difference between regional or local “autonomy” and “decentralization.”The essential difference between autonomy and decentralization is that within a unitary system, decentralization is possible but is controlled by the central government. In such a system, it is the central government that decides which powers it will transfer to the regional or local units, and the central government has the power to remove or take back powers previously allocated to the local units. In a federal system, these decisions are not made by the central government, but rather are established in the constitution, thereby guaranteeing the powers and responsibilities of the regional and local units and ensuring their autonomy. Presumably, given the past history of over- centralization in Nepal, this explains why preference has now been given to federalism.
There are also many examples of countries which have been both unitary and decentralized. Belgium is a classic example, as it went from a unitary system, to a decentralized unitary system and now to a federal system. It is up to Nepal to decide whether unitary decentralization would meet the needs of the country and its people. However, expectations have been built up that guaranteed decentralization, i.e. autonomy through federalism, would be a better mechanism for resolving the country’s issues. Although some fear that federalism could lead to the ultimate break-up of the country, if properly designed with strong central institutions, federalism could in fact bring the country together better.
There is a tendency when moving from a unitary to a federal system, as proposed in Nepal, to concentrate attention largelyon the form, nature and powers of the new units. However, it is equally important, and dangerous if neglected, to recognize that the essential feature of a federation is both regional self- rule and common shared rule. Both are equally important.
Also, it is important not to overlook areas in the division of powers between levels of government that need to be shared by the two governments and the arrangements for intergovernmental collaboration and cooperation. Arrangements for intergovernmental cooperation may include dispute resolution mechanisms such as a supreme or constitutional court; referendums, as in the case of Switzerland; or a special institution such as the “House of Federation” in Ethiopia. It is equally important to provide for representatives of the different levels of government to hold regular meetings, for example between leaders, cabinet ministers and civil servants.
In many federations, including the United States, Canada and Australia, executive power coincides with the legislative power assigned to each level of government. That appears to be the form of distribution of powers that Nepal’s Constituent Assembly is recommending. However, it should be noted that in some federations such as Germany, South Africa and Switzerland there are substantial federal legislative powers for which the executive power is assigned to the regional governments. In these systems, decentralization is achieved by having a large amount of federal legislation administered by the provincial governments.
5 How does district level government fit in a federal system?
It is common to have district level governments within each state or province within a federation. Often the organization of these is left by the federal constitution to the state or province. There are many such examples, including “zones” in Ethiopia and the “counties” in Canada. These are generally established by the regional units to reflect their particular circumstances, rather than being uniform across the country, as the needs may differ from province to province. A point to note is that every additional level or tier of government created results in greater costs and increases the need for coordination amongst levels.
There are some cases, however, where the federal constitution itself specifies the form, structure and powers of district level local governments as a third constitutionally recognized tier of government. Notable examples are Brazil and South Africa.
There are also some cases where there are federations within a federation. For example, Russia was a federation within the USSR; and the federation of Bosnia and Herzegovina consists of two units – the Bosniac-Croat Federation and the Republika Sprska. However, such arrangements are usually complex and costly and therefore rarely used.
In general, most federations leave it to each region or province to decide the form of its internal structure. However, increasingly, countries are placing the emphasis on the importance of district level local government.
Forms of Central Government
6 Should Nepal have a Presidential or Parliamentary System?
Preoccupation with regional units and their powers, neglects the equally important aspect of any federation: establishing central institutions, which are representative and inclusive of all the major groups within a country. It is important not only to have strong regional units, but also to have strong central institutions. Regardless of the type of federation, whether it is a parliamentary or presidential system, it is essential also that it should seek to be inclusive and provide representation to all groups.
There is a wide range of forms of central government amongst federations, and no single ideal. Some federations have a presidential system where the chief executive is elected by the voters for a fixed term of office and the powers of the president are separated from those of the central legislature. Examples are found in the United States, and Latin American federations which have generally followed the United States Presidential-Congressional model. Many other federations have adopted parliamentary systems in which there is a ceremonial president or monarch, but the chief executive officer is a prime minister with a cabinet chosen from among the members in the elected legislature who are responsible to the popularly elected chamber of the legislature, remaining in office only for as long as they have the support of a majority in the chamber. Parliamentary institutions have been the norm in most federations in Europe and in former British colonies. They are, for instance, found in Australia, Austria, Belgium, Canada, Germany, India, Malaysia and Spain. There is a third category which might be called the hybrid presidential-parliamentary form of executive in which there is a president with some executive powers and also a parliamentary executive (prime minister and cabinet responsible to the legislature) possessing some executive powers. Russia and Pakistan and a non- federation, France, provide clear examples, of this category.
A presidential system has the advantage of stability because the president is elected for a fixed term. Therefore, it is understandable, considering the past history of parliamentary systems in Nepal that many would advocate a presidential system. The disadvantage of the presidential system is that it may concentrate excessive power in the hands of the president, or, where involving a separation of powers as in presidential/ congressional systems, it may lead to deadlocks between the president and congress.
Parliamentary federations on the other hand have the advantage of possible representation in the executive for various groups. For example in Canada, as in many multicultural parliamentary federations, the cabinet is composed of representation of every province and of a variety of ethnic groups. However, the price of that system is the frequent need for coalitions and the potential for instability when there is a multiparty system and no stable majority. To reduce the potential for instability some parliamentary systems have required positive votes of non-confidence (i.e. votes of non- confidence have to include the naming of an alternative prime minister) as in Germany, or as in a few other recent cases, fixed terms except in exceptional circumstances.
Each system has its advantages and disadvantages and it is up to the people of Nepal to choose which system will be the most effective and appropriate for providing stability and ensuring representation of the diverse groups within the country.
An interesting example for Nepal to consider, is the Swiss collegial fixed-term Federal Council. In Switzerland, the executive council is elected by a parliament for a fixed period, and the presidency rotates annually among the seven members of the executive. And, it is possible for different parties, linguistic groups, men and women all to be represented in the seven person council. Therefore, this Swiss model has the advantages of both systems, and could be adopted with a larger executive, depending on the needs of the country. Some however have argued that the Swiss model is not exportable and can operate only in the unique political culture of Switzerland. Nevertheless, it is an example of separation of power between the executive and the legislature, and yet a collective executive with diverse representation.
7 In what manner should the federal legislature and executive be elected?
There is no particular form of electoral system that is common to all federations or that is a requirement for federalism. Eachfederation has adapted its electoral system according to the history and circumstances of the country. A proportional representation system allows for greater accuracy in the representation of all the different parties within the country. However, this system usually also leads to a multiparty system which can create problems in producing cohesiveness at the central level. Proportional representation can also overly emphasize the role and domination of political parties at the expense of individual citizens because they control the lists of candidates. The first-past-the-post (single member plurality) system has the advantage of more regularly producing a parliamentary majority, but it often over-represents the majority vote and under-represents the minority votes. It does however establish a more direct link between the individual representative and the voters. There is no perfect form of electoral system and that is why some federations such as Germany have adopted mixed systems with half the members elected by proportional representation and half from single member constituencies. This tries to balance the advantages and disadvantages of each.
There have been some proposals in Nepal for a directly-elected prime minister. Such a system has to date never been adopted in a federation. In terms of international experience, most federations have either adopted a full-fledged presidential system, where the president is directly elected and power is divided between the executive and the legislature, thereby preventing excessive power; or a parliamentary system in which the power of the prime minister and executive council is controlled by the legislature.
The use of a ceremonial president is common in all parliamentary systems, whether it be via a monarch or an elected or appointed ceremonial president. The position is rotated to ensure representation of different groups.
The Central Legislature
8 Should Nepal have a bicameral or a unicameral central legislature?
Taking federations together as a group, there have been only a few with a single house in the central legislature. Significantly, nearly all of these examples have failed or have had numerous difficulties. The large majority of federations have in fact found it highly desirable to have a bicameral central legislature to ensure meaningful representation for the various different groups existing within federation.
A system with only one house based on population means that smaller regions or groups do not receive adequate effective voice in central policy decisions. A bicameral system may cost a little more. Nevertheless, much more is lost by not having this arrangement as the voices of minority groups become overwhelmed by the majority in a single chamber based on population.
Out of approximately 25 current federations, some 20 have two chambers. The exceptions are Venezuela, the United Arab Emirates, and the three island micro-federations of Comoros, Micronesia and Saint Kitts and Nevis. Therefore, the main question Nepalis should be asking themselves is not whether or not to have a second chamber, but what form the second chamber should take – who should it represent and what power should it have in relationship to the other house.
At the provincial level it is more common in federations to have only one house although there are a few cases where there is a second chamber also at the provincial or state level, particularly when there is a diverse internal population within the regional units. An interesting example to consider is the case of Ethiopia, in which two out of nine states have a secondhouse, a result of the multiethnic composition in those two states.
An interesting unique device that has been created in Ethiopia is the“House of Federation”which is composed of representatives of nationalities. Each nationality has one representative, plus one for each additional million population. The House of Federation is primarily not a legislative body but rather acts as the ultimate arbiter in interpreting the constitution and in cases of conflict between the central and provincial governments.
9 What powers and responsibilities should be entrusted to a second chamber?
One of the main features of most federal second chambers is that they have a different form of election and composition than the first chambers. It is highly unusual for federations to have a second chamber based on representation by population. The only example would be Italy, and it is currently in the process of converting its Senate to a regional house, representative of the regional units. In most federations it is considered highly desirable when the allocation of seats in the first chamber is based on population to have the second chamber based on special representation of regions and minority groups.
During the creation of the United States, the issue of legislative representation created a deadlock at the Philadelphia convention. One group wanted representation by population and the other, which feared domination by the larger states, wanted equal representation of each state. The deadlock was broken when a compromise was reached in which the decision was made to have two houses – one based on population and the other on equal representation of states. Since that time, most federations have opted for such a bicameral approach.
In determining the organization of the second chamber, there are four main questions:
- What should be the method of election or selection? (direct by the electorate or indirect by the provincial or state legislatures)
- What will be the composition of the chamber? (equal, or proportional representation of constituent units with some weighing to favour smaller provinces)
- What powers will the second chamber have? (equal, special or lesser power than the first chamber)
- What will be the primary role, or special role, of the chamber?
There are variations amongst federations; however for most the second chamber is based on the notion that it is not simply a repetition of the first chamber, but rather a different form of representation expressing the diversity of the country.
Political Party System
10 Should Nepal have a multi-party or two-party system?
The form of party system depends on the nature of diversity within the country. There are federations with a two party system and those with a multiparty system. A presidential system provides incentive to reduce parties to two, because in order to elect one person as President, a majority of the total population is required to vote in favour of a candidate. On the other hand, parliamentary systems are composed of cabinets with multiple representation and often have operated in a multiparty context.
Therefore, to some extent if Nepal decides to move to a two party system it would be better to implement a presidential system. If the country is to be based on a multiparty system, it would probably be better to have a parliamentary system. Each has its advantages and disadvantages.
The Judicial System
An especially important element in any federation is the independence and impartiality of the judiciary. In most federations, the judicial system, particularly the supreme or constitutional court, acts as the arbiter for interpreting the constitution and settling disputes. It is therefore important that the Supreme Court or Constitutional Court not be under the control of any one government and that it cannot be overruled by the legislature of one level of government. If one level of government can overrule the judiciary then that government ultimately controls the system and you no longer have two orders of autonomous government, which is an essential feature of federalism. If the central government or parliament can override the judiciary that undermines the federal structure and makes it in effect unitary.
Most federal systems have had some arrangements in the constitution to ensure the impartiality and independence of the judiciary. In the United States, the President names the judges, but they must be approved by the Senate, which represents the different states. In many other federations, there is a special judicial services commission which plays the major role in naming the senior judges. Also, there are usually constitutional provisions to prevent arbitrary dismissal of judges.
Furthermore, it is important to develop, over time, an inclusive system of appointment ensuring representation of diverse groups in the courts. In Belgium, for instance, the French and Flemish are equally represented on the Court of Arbitration and in Canada three of the nine Supreme Court judges are from Quebec. In Germany, the appointment process for the
What are important elements for a judicial system?
The United States, the first modern federation, established a dual system: one set of courts for federal laws and one set of courts for state laws. Some federations, however, have argued that a dual system is costly, and, therefore, that a single system can suffice as long as it is truly independent and impartial.
Some in Nepal have argued for the central legislature to be the final arbiter in regards to constitutional interpretation. If the central legislature has the final word in this regard, it ceases to be a federal system, because in the end the central government determines the interpretation of the constitution and consequently the powers of the regional units. An independent and impartial constitutional or supreme court is an essential feature for a federal system. There are two exceptions. In Switzerland referendums are used to serve as the ultimate constitutional arbiter (but this can be costly). In Ethiopia the second chamber of the central legislature, composed of representatives of all the nationalities and advised by a judicial Council of Inquiry, is given the ultimate power to interpret the constitution. Thus, in this case it is not the central government, but rather the various nationalities within the country that are making final decisions on the interpretation of the constitution.
Should Nepal have a single or dual judicial system?
25 Is it necessary to have a constitutional court?
Demarcation of Units
Broadly speaking, there are two approaches to delineating boundaries within federations, those federations which have demarcated units based on identity and those which have not. There are arguments both for and against forming units on the basis of ethnicity. One group of scholars has argued that ethnic units create divisiveness within federations and should therefore be avoided. However, an alternative approach is that the recognition of ethnic units actually increases unity within the federation. Those holding this view argue that by recognizing ethnic groups and providing them with control over their own affairs through regional autonomy, it is more likely that these groups will be willing to work together with other groups in the federation. Determining the basis of units has not been a problem for federations which were formed by bringing together already existing units (aggregation), but for those countries transitioning from a unitary system, such as Nepal, an important issue is defining the new constituent units.
In considering this issue, one has to distinguish between theory and practice. In theory, demarcating constituent units to represent distinct ethnic groups, each with regional self-rule, has much to recommend it. In practice, however, the creation of units based solely on ethnicity may be extremely difficult because of the ways in which the variety of ethnic groups are geographically distributed and intermingled. Consequently, most federations have had to take into consideration a number of criteria for demarcating units, for example the homogeneity of population, geography, administrative capacity, transportation facilities, viability of natural resources and possibilities of economic development. Providing self-
What is the experience of other federations regarding the demarcation of units? determination to a particular group through the creation of units based on identity does not guarantee its capacity for survival or development. The ability to be economically stable and facilitate development needs to be considered as well. Since this is a complex process a number of different methods have been used to establish boundaries and define units in federations. In South Africa a commission was established, comprised of experts, to determine the appropriate demarcation of regional units. In Switzerland, a series of cascading referendums was used to decide the boundaries of the new canton of Jura.
Most federations have taken account, also, of the requirements of economic viability and development when creating new units. Since expectations have already been raised in Nepal in regard to recognizing ethnic differences some effort to reconcile these considerations with other factors will be necessary. A possible solution, which would allow for other criteria to be considered, is to group provinces together in zones. In Russia for example, 86 units are clustered into seven groups. This solution would allow ethnic states to be created and grouped into zones in terms of their economic development, resources, communication and so on. These zones could each have a council, comprised of representatives from each province, who would also collaboratively work with the central government. This is a possible solution to deal with the problem of reconciling the need for recognizing both economic regions and identity communities. Another example of interest is that of Ethiopia where the constituent states were primarily created on the basis of ethnicity, but two of the states themselves contain a multiplicity of ethnic groups and are therefore subdivided into sub-state zones.
Is it economically viable to form units based solely on ethnicity?
16 What is the appropriate number of constituent units?
In federations with only two or three units, it is almost inevitable that rivalry amongst the units will dominate and prove divisive and explosive. As a general principle, derived from the study of many federations, having less than six units tends to lead to excessive internal rivalries. If one examines federations from around the world, most stable federations have between 10 and 25 constituent units. For example, Switzerland, which has a population of only 7.5 million, much less than Nepal, has 26 cantons. The cost of units has to be taken into account both in financial and in human terms, but one also has to consider the danger of having too few units. The initial financial cost of having fewer units may be smaller, but in the long term fewer units that are not properly designed could mean larger political costs later.
There is one proposal in Nepal for 14 constituent units: There have also been questions over whether this number should be reduced. If units are too small in size (population) there will be real difficulties in ensuring that people within the unit can have influence on regional policy. If the unit is too large, you lose the benefits of local self-rule.
Another important issue is relative balance among units. Units cannot all be exactly the same size, but experience in other federations has shown that instability can be a result if there are great disparities and especially if one large unit dominates all the other units. Examples of the latter include Russia within the USSR before its disintegration; the initial arrangements in Nigeria in 1963 in which the Northern Region had a majority of the population, a factor in the resulting civil war; Pakistan between 1947-71, which led to the secession of Bangladesh; and Jamaica which had a majority of the population in the Federation of the West Indies which soon totally disintegrated. These experiences should be considered when examining the
movement in Nepal for a single Madhes province. The solution to the problem created by a single dominating province has usually been to divide that population into more than one unit. For example, in Canada the majority English speaking population is divided across eight provinces, and in Switzerland the majority German speaking population is divided across 17 out of 26 cantons.
Considering the history of the Madhesi people, it is understandable that there has been a demand for a single Madhes unit, however, the resulting disparity in size of constituent units could be dangerous. Since the powers of any regional group will depend on the power given to that group by the constitution, to focus solely on the creation of an all inclusive Madhes unit does not guarantee sufficient powers. More important than creating one Madhes unit is ensuring that each of the Madhesi units have adequate power to control their own affairs.
The Rights of Ethnic, Minority and Marginalized Groups 17 How does one define nationality?
Nationalism within a federation depends on how one defines nationality, whether it is defined in ethnic terms or in civic terms. Ethnicity takes into account the general issues of language, caste, religion, etc., that makes a group distinctive. Nationality on the other hand generally represents a group of people who have lived together with some common identity for a significant period of history. Nationality can take two forms; one is ethnic nationality in which an ethnic group sees itself as a nation that is distinct from all others. Civic nationality is a nation which sees itself as a nation not on ethnic grounds, but rather on grounds of common interest and past history. Many forms of nationalism are not based on ethnic distinctiveness, but rather on historical or traditional association. Canada is anexample where one could say that in Quebec there is an ethnic nation, a distinctive ethnic group largely based on language (French), but the federation as a whole represents a civic nation (not based on ethnic distinctiveness). In ethnic terms Canada is a multinational federation. There are many ways to combine the two forms of nationality within a federation, and one manner, which may be appropriate for Nepal, is to have civic nationality represented by the federation as a whole and ethnic nationalities represented in the constituent units.
18 How can dispersed groups be protected?
Often in a federation there are many distinct groups which are distributed widely across the federation, and are therefore not geographically concentrated enough to have their interests dealt with by a single regional government. An example is the situation of the African-Americans in the United States. Their dispersion contrasts with that of the French Canadians, 80 per cent of whom are concentrated in one province, Quebec, and therefore can have their concerns largely dealt with by the Quebec provincial government.
Equality for all groups is important, whether dispersed or concentrated, but in the former case they cannot depend upon regional unit governments to deal with their interests. Dalits for example in Nepal are dispersed all across the country, and thus creating a single regional unit for them is difficult and is not a solution. The most common solution in federations for such groups has been the inclusion in the constitution of a list of fundamental equal rights to be applied across the country, including, where necessary, support for affirmative action by the federal government. In Canada, the Charter of Rights and Freedoms was created in 1982 to deal with such situations.
A Constituent Assembly Committee Report has recommended that Nepal set up a number of commissions to deal with suchissues. These could be useful but an excessive number of these commissions could be quite costly. It might be worth considering creating one commission at the federal level, appropriately organized, with regional representation.
The issue of rights for women is also important in a federation, especially since they are half of the population and spread throughout the federation. Because of their distribution throughout the federation the provision for these rights needs to be achieved through federation-wide constitutional provisions and legislation rather than regional provisions. Women, like the Dalits, are distributed all across the country; therefore regional provisions are ineffective in ensuring their rights. Nearly all federations, except for Australia, contain in the federal constitution a list of fundamental rights to protect such geographically dispersed groups. These include equal rights for women and particular rights for certain underprivileged communities that require assistance in order to develop.
19 What is the relationship between the right to self-determination and federalism?
Nepal has a unique situation in which there are 103 ethnic groups, with no single group in a majority. In such a situation and given the overlaps in the geographical concentrations of these, it is difficult to provide each group with self- determination through self-rule in its own constituent unit. Nevertheless, some lessons can be learnt from examples elsewhere like Ethiopia. There, the accommodation of such groups has been attempted through emphasis on sub-units within states and upon genuinely autonomous district level local governments where minorities within the state may have autonomous control of their own affairs.
This raises the general question of the relationship between “self-determination” as a principle and federalism. It is in order to facilitate self-determination for different groups thatfederations provide for autonomous self-governing regional units and local governments. However, self-determination is not an absolute principle overriding all others. In a federation it is balanced and qualified by the need to achieve the benefits for all groups of joint action in the areas of their shared common interests. Thus, in addition to recognizing the desirability of self- rule at the constituent unit level to achieve self-determination, this needs to be balanced by an effective federal government in order to gain the benefits of united action.
Without unity, a federation would collapse and disintegrate and each group would lose the benefits of joint action. Unity requires two things – first it requires building into the central government the principles of representativeness and inclusiveness. It is important that the central institutions provide a place for all people of the diverse nation to have a say in the federation. Therefore, in most federations there are rules either written or practices, that ensure that the central government (executive, legislature and public service) represents the various groups across the country. Among mechanisms for ensuring representation is the rotation of the ceremonial head of state so that at various times different groups are represented through the position. In Canada for example, the position of ceremonial head of state rotates normally between an English Canadian, a French Canadian and a representative of other minority groups. For instance, the position of Governor General in Canada was recently held by a woman who was born in Haiti and who spoke French, English and Spanish. She represented the multicultural character of the country as a whole. Also particularly important is ensuring that the central institutions are stable, as nothing harms unity more than constant instability in the central government.
In Canada, ethnic conflict has not resulted in civil war, although that might well have been the case if federalism had not been adopted. Canadian unity has been based on the recognition of French Canadian autonomy within the federation. There is still sovereignist movement in Quebec, but the majority in Quebec has not voted for separation. In part this is because Canada has progressively increased its decentralization to accommodate the self-rule of the Quebecois population though its provincial government.
20 If preferential rights are provided to some communities, what will happen to the other communities living in that region?
A number of questions are raised when identity is taken as the basis for units but groups overlap in their geographical distribution. Issues of prior rights, equal political rights and self- determination are all raised since in practice it has never been possible in any federation to design units that are completely ethnically differentiated. There are always some overlaps. The most relevant example in terms of these issues is Ethiopia, which deliberately set out to create an“ethnic”federation. Some constituent units in Ethiopia could be fairly clearly defined in ethnic terms, but in the southern region of the country there is one state comprised of 56 different groups. In an attempt to resolve the situation, zones were set up within the state for different ethnic groups. This is similar to the proposed notion of autonomous regions within provinces suggested by the report of the Constituent Assembly Committee on State Restructuring and Distribution of Power. However, the problem remains that often new minorities are created within those regions. No matter how carefully the boundaries are drawn, there will always be some minority groups left inside a constituent unit.
Often in these cases, preferential rights for the majority or indigenous group in the region have been claimed involving discrimination against other groups. Such claims have had a particularly contentious history in Nigeria and Malaysia, for instance. Most other federations have resisted such claims, insisting on equal treatment of all citizens and groups within a constituent unit. Consequently, these federations have
included in the constitution special protections and rights for minority groups. This has included, in most cases, insisting on equal political rights for all citizens and freedom of movement within the federation. There is, however, one exception to this general consideration, in which affirmative action may be required to help a particularly disadvantaged indigenous group. Nevertheless, this has to be balanced against the democratic principle that normally all citizens should have equal political rights.
Although preferential rights have normally been avoided, examples do exist where they have been provided to a group. In both Nigeria and Malaysia, groups in particular states have claimed special rights. However, in both of these countries the issue of preferred rights for certain groups within a region has been highly contentious and has even led to violence.
21 How can the knowledge and skills of marginalized groups be strengthened to ensure their participation in civil society?
Education programs are vitally important for previously marginalized groups, for example in Nepal the Madhes and the Dalits. Furthermore, providing effective education programs to civil servants for all the governments established in a federation is essential. For example, in Ethiopia when a federation was established, the Civil Service Staff College was greatly expanded to ensure that people from all different groups and regions were trained to participate both in regional governments and in the central government. A provision for an inclusive education program does not necessarily need to be inserted into the constitution, but steps need to be taken in the transitional stages to ensure that programs are available for all groups. In some countries, this has been taken through affirmative action,which is necessary when there is a particularly unrepresented or under-represented group. Inclusive training
and education is a requirement in all effective federations, and although it may not be written in the constitution, it is an important element in achieving the goals of the constitution.
22 How should the recognition of the diversity of languages in Nepal be managed?
Language is a very important issue in many multilingual federations, and there are a number of experiences that can be drawn upon. The usual solution is to recognize in the constitution all the major languages in the country, but also to ensure that there is a link language for communication between different language groups to hold the country together. However, problems can occur when there are a vast number of languages within the country, as in the case of Nepal, raising questions of how to give all of them constitutional recognition. It is relatively easy for a country like Canada where there are only two major languages. In India, however, there are about 17 languages that are constitutionally recognized. There, for educational purposes, students are generally taught under a “three language policy”: their own regional language, and Hindi and English as the two interregional link languages. However, in Ethiopia there are about 80 or 90 languages which makes matters more difficult, not unlike in Nepal. In a federation the issue of identifying one or more link languages is important as it allows people from across the country to communicate with each other. Otherwise, people in different regional units may not be able to communicate with each other or take part in central level discussions. Educational policy may encourage the use of a link language for the federation as a whole and the local/regional language for the particular ethnic units. Recognition of different regional languages is important, but so is encouragement of a link language to hold the country together in federation-wide communications.
Fiscal and Financial Arrangements
23 How should the levying and collection of taxes be allocated among the levels of government?
The financial arrangements within a federation are crucial, because no matter what legislative and executive powers the constitution provides to each level of government, if a government does not have the financial resources to exercise those powers they are meaningless. On grounds of efficiency the major taxing powers, such as border taxes, VAT, income tax, and so on are usually levied and collected by the central government, but as the World Bank has emphasized, decentralization of expenditure is highly desirable for economic development. This means that in most modern developing federations, there has to be a system in which the major taxes are levied and collected by the central government, but by constitutional provision a substantial portion of the proceeds from these taxes are transferred to the constituent units to match their expenditure needs.
Federal constitutions normally specify how taxes will be levied and collected, and proceeds allocated. For example, the Indian constitution includes provisions defining certain taxes which may be levied and collected by the central government, and which of these tax proceeds are to be transferred to the states. The constitution also specifies which taxes may be levied and collected by the state governments.
Virtually all developing federations have found it to be more efficient to levy and collect major taxes centrally. Having the regions levy and collect substantial taxes in an effort to eliminate central domination and give constituent units more autonomy has proven, in almost every case, to be relatively inefficient in terms of economic development. As a result, revenues levied and collected by federal governments (before intergovernmental transfers) as a percentage of total federal-
provincial-local revenues have usually fallen within the range of 60-75 per cent, with Nigeria (98 per cent), Mexico (91 per cent), Russia (91 per cent) and Malaysia (87 per cent) still more centralized, and Switzerland (40 per cent) and Canada (47 per cent) at the other extreme.
24 How should the spending responsibilities be allocated among levels of government?
Broadly speaking, the distribution of expenditure powers in each federation corresponds to the combined cost of the legislative and administrative responsibilities assigned to each government by the constitution. Accordingly, the levels of federal and provincial expenditure vary from federation to federation, but in most federations the federal portion of expenditures (after intergovernmental transfers) falls between 45 and 60 per cent of combined federal-provincial- local expenditure with Malaysia (84 per cent) above that and Belgium (38 per cent), Germany (37 per cent), Canada (37 per cent) and Switzerland (32 per cent) below. As a general pattern these levels of central expenditure (after transfers) fall substantially below central shares of total revenue, and state shares of total expenditures are substantially above provincial shares of total revenue. This has been because in many areas such as the delivery of health, education and social services, decentralized expenditure has been regarded as more efficient, and also desirable on grounds of recognizing differences in regional communities.
25 How can the revenue and expenditure responsibilities of the different levels of government be balanced?
Given the general pattern of the desirability of greater decentralization of expenditure responsibilities than of revenue and taxing powers, the problem in every federation is
how to bring revenues and expenditures of each government into balance. The usual solution is to have financial transfers from one level of government to another. Because the central governments have generally controlled the major tax sources, adjustments have usually taken the form of transfers from the central to the constituent units of government. The size of the transfers needed has varied according to the size of the gap between the revenues and expenditure responsibilities assigned constitutionally to each level of government. Such transfers as a percentage of total provincial or state revenues have fallen generally between 25 and 47 per cent although in some federations such as Spain (73 per cent), Mexico (88 per cent), Nigeria (89 per cent) and South Africa (96 per cent) they are much higher. These transfers have taken a variety of forms: sharing of the proceeds of specified central taxes, unconditional block transfers, and conditional grants for specified purposes. Most federations have also adopted a system of transfers that “equalize”the financial capacity of different constituent units to perform the constitutional responsibilities assigned to them.
Dependence upon financial transfers from the central government runs the risk of undermining the autonomy of the constituent units of government, especially if the size and conditions of the transfers is left to the discretion of the central government. To reduce this danger, a typical pattern in the newer federations has been to establish a finance commission which decides how the transfers will be allocated. In such cases, it is clearly important to ensure that the finance commission is independent and impartial rather than taking direction from the central government.
In terms of the composition of a financial commission, federal experience has shown that having political representatives as members can often lead to controversy, as each political leader attempts to obtain the most favourable division of finances for their own region. Appropriate shares of finances
should take into account an assessment of relative capacity of each constituent unit, and in practice it has been found that experts as members of a financial commission are more efficient at this task and are less controversial than political representatives. Two examples are Australia and India, in which the commissions are comprised of experts who assess the capacities and needs of each region. In both federations, the federal and provincial governments have repeatedly accepted their recommendations. In order to ensure that a commission is not partial just to the central government, often both levels of government have some say in the choice of the financial experts.
26 What are the arrangements for banks in federal systems?
The general pattern in nearly all federations is that there should be a central bank because of the need for a common currency. There are no federations with different currencies for member units. For purposes of internal trade, it has always been understood that a federation should have a single currency. Consequently, the management of that currency and monetary policy needs to be carried out by a central bank. Nevertheless, the central bank should still take into consideration regional concerns. For example, in Canada, the recent economic crisis has resulted in some concern about the central bank’s policy in terms of balancing the different needs of provinces. Alberta which exports oil, and Ontario which is the industrial centre of the country, require very different monetary policies. Alberta is interested in obtaining the largest portion of resources from its exports, but Ontario is interested in a low priced dollar in order to export its industrial goods. The central bank – Bank of Canada – in shaping its interest rates and exchange rates has to take into account the different interests of the different regions of the country. Therefore, it is important that members of thecentral bank are chosen for both their expertise and also their regional diversity – i.e. it is important not to have all members of the central bank from the same region of the country. The method of appointment and organization of the central bank is important to ensure that it is representative of the country as a whole and should consist of economic experts and not only political representatives.
Ownership and Use of Natural Resources in the Federation
27 How should ownership of natural resources be divided among the different levels of government?
Allocation of natural resources is very important, as it is often contentious. This is because in federations natural resources have never been equally distributed among the regional units. This often creates variations in the relative wealth of different regional units. In Canada, for example, where provinces were given ownership of natural resources, this has created problems. The province of Alberta at the time of its creation was the poorest province in Canada. Half a century later, however, oil was discovered in Alberta and it has become the wealthiest province by far. This has produced large imbalances in the wealth of Canadian provinces which in turn has caused tensions amongst the populations of the provinces. On the other hand, if the federal government owns and controls all natural resources and distributes the wealth evenly across the whole federation, the citizens of the regional units where the resources are located complain that this is unfair. That has been a major issue in Nigeria. Most federations have concluded that the wealth of natural resources should go to the federal government and from there be distributed broadly amongst the regional units, but with some special compensation to the units in which the natural resources are located. This ensures that a single group does not alone receive all the benefits of
resources just because they happen to be found in a particular region, but does at least get some reward.
The distribution of the benefits of natural resources raises a cluster of issues related to the notion of prior rights. Generally in practice most federations recognize that ownership of resources is not solely the right of the people living in that constituent unit, but also the right of the federal population as a whole. There are two reasons for this, first if you give prior rights to the people where the resources are located, it creates great disparities in welfare among the different provinces. The second reason is that in some particular cases, for example water or river systems, the way in which they are controlled at one location has an effect on other locations. This is what is called the “downstream effect.” For example, if a dam is built in one province, it could affect the neighbouring provinces, and could perhaps even have international effects. Therefore, there is general recognition that there are legitimate local and provincial interests relating to natural resources, but that there are also national (federal) interests relating to them, and thus control over them needs to be shared. Australia provides a good example, where there is a coordinated federal/state program and agency mandated to control its Murray River system.
Cross-boundary water issues are not unique to Nepal. Natural resources can become a trans-boundary issue when for example river systems cross the boundaries of units. In Canada, there are also some rivers that flow to the United States; therefore it also becomes an international issue. Within a federation though, the issue of water control and hydropower can be very contentious. The solution in most federations is not to look at it in terms of prior rights since a river’s location is an accident of nature. While the surrounding populations should not suffer and their concerns should be taken into account, so must those of other neighbouring regional units. In most federations, this issue has been dealt with by the establishment of an intergovernmental institution, which determines threlevant benefits of the different groups involved, and is often comprised of representatives from all the different groups affected by the particular resource at hand.
An intergovernmental institution to deal with water issues ensures cooperative solutions from which benefits are distributed equally among the different groups. This has been an issue in numerous federations, for example India, Pakistan, and Canada. It is important that one region in a federation does not benefit at the cost of the other. Federations require not only dividing power, but also building institutions for cooperation. Federations are partnerships of different groups of people, and to have one group take all the benefits at the expense of others is a recipe for controversy and potentially even a source of violence.
It is desirable to make provisions in the constitution for control of natural resources, but this inevitably tends to be a very contentious issue. The Constitution should therefore contain the basic principles stating that natural resources belong to the federation as a whole, but that the interest of the local region(s) must be taken into account. Such a provision would be highly desirable, and would allow for more specific details such as power management, river system management and coordination to be left to later.
28 What is the experience of other countries in drafting a constitution?
In federations, the process of federalization has usually stressed the importance of providing stages for public discussion and comments on proposals. The use of a Constituent Assembly to draft the constitution is quite a frequent process, but usually there has also been an opportunity for considerable public input.
Another point to consider is the issue of deadlines and time limits. These are useful because they provide a target and pressure for decisions to be made, but it is not unusual, when complex issues arise, that these time limits have had to be extended. In Ethiopia there was a two and a half year time limit placed on the process, but this was extended for another year. In Pakistan, it took nine years to write its first constitution – although this excessive length of time is not recommended. It is more important to ensure that solutions to complex issues have widespread consensus and support, than it is to ensure that deadlines are met.
In addition, sometimes federal constitutions have built into them flexibility to make decisions on contentious issues over a longer period of time, so as not to obstruct the initial process of ratifying the constitution. In India, the issues of boundaries and the identification of constituent units were known to be very complex and difficult, and could require further changes over time. Therefore, the constitution was built with flexibility relating to the amendment process for state boundaries. In Spain, the constitution laid out certain major principles, but the negotiations over actual powers of regional units were done subsequently by individual statutes of autonomy. Thus, Nepal’s Constituent Assembly may wish to consider building into its constitution the flexibility to make subsequent adjustments in the light of circumstances.
29 What should be the role of political party leaders in the development of the constitution?
In most federations, the major political party leaders have played a prominent and crucial role in the design and development of the constitution and in reaching a consensus on a final resolution. The responsibility has not been left just to the regular members of the Constituent Assembly to make all the decisions, although their full involvement has always
been important. One example of a leader playing a pivotal role in the drafting of a constitution was India’s Prime Minister Jawaharlal Nehru who played a major role in the drafting of the Indian constitution.
Throughout history, the creation of federations has reflected the importance of political leaders working together to find a resolution. Therefore, at this stage in Nepal’s process, it is desirable that the leaders of the political parties take a key role in the constitution drafting and peace process.
30 What is the role of referendums in the adoption or revision of a federal constitution?
A number of very successful federations were established after ratification through a referendum. Switzerland and Australia were examples in which federal constitutions were drafted and then put to a country-wide referendum. The referendum in both cases had to be approved by a majority of the population of the country, and by majorities in a majority of the federating states. In both countries, once the constitution was adopted, major amendments to the constitution have also required referendums obtaining an overall majority and majorities in a majority of constituent units as well. However, a referendum for such purposes is not a universal rule in federations. In other countries, the decision and ruling of the constituent unit assemblies has been considered sufficient. Each country has decided for itself what approach is most suitable and appropriate for ratifying a new constitution.
The financial costs of referendums are important to consider, but these need to be balanced with the consequences that may occur from not obtaining public support. If a referendum can resolve a political controversy, it may be worth the price of ensuring public support rather than having subsequent conflict or violence break out in the country.
Ronald L. Watts
About the Forum of Federations
An international governance organization founded by the Government of Canada in 1999, the Forum of Federations (the Forum) is concerned with the contribution federal and devolved forms of governance make to the maintenance and construction of democratic societies and governments. The Forum seeks to strengthen democratic federal governance through learning among practitioners and experts.
It pursues this goal by:
- Enhancing mutual learning and understanding of federalism among practitioners;
- Building international networks and fostering the exchange of experience on federalism and multi-level governance; and
- Disseminating knowledge and technical advice of interest to existing federations and of benefit to countries considering devolved and decentralized governance options.
Today, it is supported by nine partner governments: Australia, Brazil, Canada, Ethiopia, Germany, India, Mexico, Nigeria and Switzerland, and it currently has development assistance programs in Ethiopia, Nepal, Nigeria, Pakistan, Sri Lanka, and Sudan.
In the summer of 2008, the Forum of Federations started its 3-year program Federalism in Nepal: Supporting Nepal’s Constitutional Transition, which aims to:
- strengthen the capacity of the Constituent Assembly members to draft a federal constitution,
- enhance knowledge of federal systems among political party leaders and civil servants, and,
- increase public understanding of federalism.
The Forum of Federations has a local office in Kathmandu, and is formally registered with the Government of Nepal. Its 2008- 2011 Nepal program has been mainly funded by the Swiss Agency for Development and Cooperation (SDC).
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