Federalism, conflict and question of stability in Nepal

1 The context

Nepal’s governance system for the several decades after the political change of 1950 used various approaches to decentralisation and participation. The Local Self Governance Act 1999 was one of the latest efforts to achieve decentralisation. However, all these efforts were not able to achieve the desired outcome. The centralisation of power and resources at the political-level in development areas did not change much, and the decades of decentralisation efforts were unsuccessful in ensuring the inclusion and participation of people in decision making, even after the political change of 1990 (Jana Andolan I). The governments after the political change of 1990 made some efforts to achieve decentralisation and some achievements were made in specific sectors, such as community forestry, but at the structural level these efforts were not able to achieve the full decentralisation, inclusion and participation of people in state affairs (Shrestha, 1997; Pandey, 1999). This led to dissatisfaction and frustration, creating favourable ground for the armed conflict and contention (Upreti, 2009). Hence, the debate on the need for a different governing structure, i.e., a federal structure, started. After Jana Andolan II in April 2006, the need for a system such as federalism capable of addressing the problems of a unitary state became more prominent. This chapter discusses the potential of federalism to address conflict and proposes some mechanisms for addressing possible conflict arising within federal structures.

2 The call for federalism in Nepal

When the king imposed absolute autocratic rule on 1 February 2005, the need for fundamental change (which had earlier been realised by the CPN [M]) was realised by all major political forces in Nepal. The preamble of the 12-point understanding reached between the SPA and the CPN (M) on 22 November 2005 expressed this need, calling for democracy, an end to the monarch and a new political structure:

The long struggle between absolute monarchy and democracy in Nepal has now reached a very grave and new turn. Establishing peace by resolving the 10-year old armed conflict through a forward-looking political outlet has become the need of today. Therefore, implementing the concept of absolute democracy through a forward-looking restructuring of the state has become an inevitable need to solve the problems related to class, caste, gender, region, etc. of all sectors including political, economic, social and cultural, bringing autocratic monarchy to an end and establishing absolute democracy.

This need was further refined in the CPA, which in its preamble “Pledg[es] for the progressive restructuring of the state…” and “Reiterat[es] commitments to competitive multiparty democratic system, civil liberties, fundamental rights, human rights, complete press freedom, rule of law and all other norms and values of democratic system”.

Article 3.4 of the CPA reaffirms the commitment to, among other things, a “political system that fully comprehends the concepts of universally adopted principles of fundamental human rights, multiparty competitive democratic system…”.

Article 3.5 of the CPA undertakes to: “End the existing centralised and unitary state system and restructure it into an inclusive, democratic progressive system…” It proposes to “… address various problems including that of women, Dalits, indigenous community, Madheshis, oppressed, ignored and minority communities, backward regions by ending prevailing class, ethnic, linguistic, gender, cultural, religious and regional discrimination”.

The state restructuring provisions of the CPA were enshrined in the Interim Constitution 2007. Article 138 1) (as amended on 12 April and 12 July 2008) of Part 17 (Structure of state and local self governance) of the Interim Constitutions proposes:

To bring an end to discrimination based on class, caste, language, gender, culture, religion and region by eliminating the centralised and unitary form of the state, the state shall be made inclusive and restructured into a progressive, democratic federal system.

The end of the unitary and centralised state was agreed upon. However, federalism was not necessarily explicitly envisioned as the form of state restructuring. Though the 23 point agreement (2007) vaguely stated federal issues other major agreements or of the Interim Constitution were not much referring to federalism. In 2008, the Interim Constitution 2007 was amended to incorporate term federalism, in response to the ethnic/regional (Madhesh) movement. The fifth amendment to the Interim Constitution on 12 July 2008 states:

Accepting the aspirations of indigenous ethnic groups, and the people of the backward and other regions, and the people of Madhesh, for autonomous provinces, Nepal shall be a Federal Democratic Republic.

The amendment further provides that:

The provinces shall be autonomous, with full rights. The Constituent Assembly shall determine the number, boundary, names and structures of the autonomous provinces and the distribution of powers and resources, while maintaining the sovereignty, unity and integrity of Nepal.

The Constituent Assembly is now working on translating these principles into practice in the new constitution. Various committees are working to deal with specific issues of the constitution (see Box 1).

Box 1 The CA Committees
Thematic committees:
1. Constitutional Committee
2. State Restructuring and Resource Allocation Committee
3. Fundamental Right and Directive Principle Committee
4. Minorities and Marginalized Communities Right Protection Committee
5. Legislative Organs Delineation Committee
6. State Rules Delineation Committee
7. Judiciary Committee
8. Constitutional Body Delineation Committee
9. Natural Resource, Economic Rights and Revenue Allocation Committee
10. Cultural and Social Solidarity Delineation Committee
11. National Interests Protection Committee

Procedural committees:
12. Civil Relationship Committee
13. Public Opinion Collection and Coordination Committee
14. Capacity Enhancement and Resource Management Committee

Among them, the Constitutional Committee is vitally important in drafting the constitution, based on the technical work on thematic issues done by other committees. The State Restructuring and Resource Allocation Committee is charged with the task of developing a concept of how to restructure the state and allocate the resources that will minimise conflict. Similarly, the Minorities and Marginalized Communities Right Protection Committee will address the issues of exclusion and protection of minority rights, which was one of the main causes of conflict in the past. The Natural Resource, Economic Rights and Revenue Allocation Committee will develop a concept of resource allocation in such a way that it will minimise future potential conflict. The National Interests Protection Committee will put forward concepts and proposals on vital national interests to be protected, which will ultimately minimise the potential for future conflict.

3 Objections to federalism in Nepal

In Nepal, all of the 25 political parties represented in the CA, except for one (Rastriya Janamorcha), have accepted the federal political system. Only, Rastriya Janamorcha vehemently opposes federalism. The party’s concerns and arguments are that federalism:
• Weakens sovereignty and increases the risk of disintegration of the nation
• Promotes communal disharmony and ethnic conflict
• When states are based on ethnicity, promotes hatred against each other
• Erodes national feeling and weakens national identity, while strengthening ethnic and communal identity
• Is not the Nepali people's agenda, but is coming from the vested interests of India to keep Nepal weak and instable
• Leads to the breakdown of national political parties into regional ones, which causes related tensions
• Leads to discrimination of people within the nation as the rules of different states vary
• Results in ineffective delivery of government services
• Is operationally expensive, not sustainable for Nepal
• Brings unanticipated consequences and problems

Some intellectuals argue that federalism is mainly suitable for unifying separate small states, but is not appropriate to separate a unified state. On the political front, Rastriya Janamorcha argues that federalism was introduced by a few elite politicians under external influence who wrongly equated a centralised state with a unitary state. They believe that decentralisation would have been sufficient to address concerns that other politicians want to address through federalism.

The opposition of Rastriya Janamorcha to federalism has provided ample inputs for decision makers to ponder the challenges involved in implementing federalism and the measures that need to be taken to address the concerns raised by Rastriya Janamorcha. Proper debate on the benefits and limits of federalism can help to avoid deficiencies in design and implementation.

4. Problems inherent in centralised and unitary states

Conceptually, unitary and centralised states are different. However, in the case of Nepal, these two concepts are heavily intertwined. Nepal has been a unitary country since its inception in 1768. A unitary state is a country constitutionally governed with one constitutionally created legislature as a single unit. The political power of government in unitary state may be transferred to lower levels at regional or local governing, but the central government retains the principal right to recall such delegated power. Many unitary states have very good decentralisation. However, in the centralised state, the system of governance (political power) is heavily centralised (i.e., power is exercised by the central government only, and not divided between different levels of government). The Nepalese people and politicians have understood these two concepts (unitary and centralised) as the same and used the terms interchangeably. In contrast, a unitary system can be decentralised (one source of power, but exercised at different levels: central, district and local), and attempts were made to do this in Nepal in the 1990s, but, for various reasons, real power was never devolved from the centre to the districts.

The political history of Nepal demonstrates that a unitary state, dominated by centralised governing practices, cannot address the needs and interests of the Nepalese people. This is mainly because of Nepal’s multiethnic, multi-religious and multicultural character. The concentration of power and resources at the centre and in the hands of the power elite, excluded large sections of society (women, Dalits, ethnic groups, people from remote regions and other marginalised groups). Further, the centralised political system led to a centralised bureaucracy, judiciary and security, largely inaccessible to those outside the mainstream culture. The centralisation of power in the hands of a few also led to corruption and irregularities, which became an integral part of the political process. The political elite used their positions to further their own interests and the system of afno manchhe (literally translated ‘own people’) made nepotism and corruption structurally embedded. One of the main reasons for exclusion was the failure of the ruling elite to recognise the importance of the involvement of excluded people in the state building process. For stability, it is important to build an inclusive state; one of the arrangements that can facilitate this is a federal structure created by a new process of nation building, involving people and sharing power.

Nepal as a unitary state was also unsuccessful in generating employment opportunities for the large mass of unemployed people. Semi-educated, unemployed and left-out youths became frustrated and a source of conflict and insecurity. If social and economic structures and their governing practices promote and protect elite-biased, power-centred and discriminatory social practices, the potential for social tension and violent conflict is high. The inability of the state to deal with the socio-economic sources of the armed conflict – poverty, social evils and perversions such as ‘untouchability’, other forms of discrimination based on caste, class, religion and gender, injustice and inequality, and lack of access to and control over resources and basic services – and its propensity to even directly and indirectly perpetuate these sources, fuelled feelings of injustice and frustration, and a deep dissatisfaction with the government. When there is great dissatisfaction with government performance and rebellious sentiment in suppressed people, social tension is inevitable.

The ethnic dimensions of the political change from a unitary to a federal system in Nepal are very strong. There are wide differences between ethnic groups and caste groups in Nepal based on language, religious practices, legal and judicial systems, indigenous arrangements, representation, citizenship and distribution of state privileges. Although the ethnic movement existed earlier, it emerged strongly during the popular movement of the 1990s. The political change of the 1990s failed to properly address the aspirations of the various ethnic groups. Maoist insurgency capitalised on this by supporting ethnic groups to seek their rights and articulate their demands, bringing the ethnic movement to a turning point.

In the beginning, the pro-Maoist ethnic movement focused on the right to self-determination (it was not clearly explained whether or not this meant a separate state/country or full autonomy within the sovereign country), whereas the non-Maoist ethnic movement focused on guaranteed autonomy through a federal system. The Maoist documents during the ten years of the armed conflict clearly highlighted this issue. However, this distinction gradually faded and the focus shifted to a radical ethnic identity demanding ethnic federalism with the right to self-determination coloured by anti-caste radicalism. Now the ethnic demands coming from ethnic leaders are too one sided that deny the co-existence, seek special privileges such as prior rights and impose the ethnic supremacy over other people 9e.g., naming provinces based on certain ethnic group such as Limbuwan, Tamsaling or Khumbuwan, etc.) and even threatening that if these demands are not fulfilled they will go for violence that ultimately induce conflict and tension.

When the Interim Constitution 2007 was negotiated by the major political parties, federalism was not explicitly included in the constitution, and even Maoists, who constantly raised this issue during the 10 years of the armed conflict, did not take a stand on the issue. In response, the Madheshi leaders burnt the newly promulgated Interim Constitution, protesting that the major political parties were not committed to federalism. The Madheshi movement resulted in the amendment of the Interim Constitution to include federalism.

As discussed in the Chapter 3, Nepal, as a centralised state, was not able to address the structural causes of the armed conflict (such as exclusion in its multiethnic society) or to manage the strongly ideologically based armed conflict. Hopefully, an appropriately designed and publicly owned federalism will help to transform the conflict and address the issues and concerns of Nepal as a multiethnic, multi-lingual and multi-cultural society.

5. Federalism as a means of conflict resolution

Poverty, structural inequalities, political oppression, social and political exclusion, gender, caste and ethnic-based discrimination, skewed distribution of the resources of production, corruption and continuous failure of the successive governments to address these structural problems were the root causes of the armed conflict in Nepal. The Maoist insurgency was merely the manifestation of these problems. Nepal’s feudal legacy, political instability, and feelings of injustice and frustration further contributed to the conflict.

The concentration of power and resources at the centre and the exclusion of the peripheries were common characteristics of Nepal for centuries. A federal governing system can address the problems associated with the distribution of power and resources, while also recognising and respecting diversity, thereby reducing conflict and tension. Principally, federalism also gives federal units the right to self-rule, giving them control over their own destiny, reducing the potential for rebellion against the state.

Nepal is not the only war-torn country to opt for federalism as part of the solution to its problems. Several countries have adopted or readopted federalism after armed conflict. Mexico (1971), Argentina and Venezuela (more than once), Nigeria (1966-70), Ethiopia (1991), Spain, Bosnia and Herzegovina, Sudan, Iraq, and the Democratic Republic of Congo are some other examples.

In Chapters 6 to 12 various aspects of federalism have been discussed to address the problems faced by the Nepal. They conceptually deal with how to allocate resources and power among and between federal units, how to overcome possible tensions among and between federal units and between the centre and the federal units, how to protect minority rights, how to establish mutual support among the federal units, and so forth.

6. Potential sources of conflict within federalism

Federalism is not a magic wand that can solve every contradiction existing in Nepalese society. The wrong handling of the implementation of federalism can cause civil war and disintegration of country (e.g., Yugoslavia and the USSR in 1991, the splitting of Czechoslovakia in 1992, Serbia and Montenegro in 2006, and the civil war in Nigeria in 1967). It can even be argued that the kind of federalism introduced is at least as important as whether or not federalism is introduced at all. The following are some potential problems with federalism and areas of potential conflict that must be anticipated in the federal design. The possible solutions to these problems have already been discussed in detail in Chapters 6 to 12.
6.1 Sharing fiscal power and resources

The sharing of fiscal power and resources is one of the main potential areas of conflict in a federal state. If appropriate mechanisms for the distribution of fiscal power are absent, it can create conflict later. Federal countries like Australia, Spain, Malaysia and Germany are relatively centralised in their distribution of fiscal powers (i.e., the central government has the main power to collect tax and other revenues), compared to Switzerland (which divide the right to taxation amongst the 3 levels), Brazil and Canada (which leave the right to raise revenue mainly in the hands of the federal units).

If revenue means and expenditure needs for the various federal units are mismatched, it can lead to tension and dysfunction. Anwar Shah argues:

Vertical fiscal gaps and revenue autonomy at sub-national orders of government remain areas of concern in federal countries where the centralisation of taxation powers is greater than necessary to meet federal expenditures, inclusive of its spending power. This leads to undue central influence and political control over sub-national policies, and can even undermine bottom up accountability. This is a concern at the state level in Australia, Germany, India, Mexico, Canada, Malaysia, Nigeria, Russia, Spain and South Africa .

Hence, clearly defining fiscal relations, tax assignment and tax-based revenue sharing mechanisms is crucial. Once the central government starts developing direct relations with local government, the relevance of the federal units in terms of economic issues may also be in question, despite their intact constitutional or political roles (like in Brazil, USA or Canada).

6.2 Protection of minorities, marginalised and excluded groups

One of the main causes of the armed conflict in Nepal was the exploitation, discrimination, marginalisation and social exclusion of certain communities/groups. The demand for a federal governing system is largely to address this problem. If the new federal governing system protects minorities, marginalised and excluded groups, then the possibility of conflict and tension related to these issues is reduced. Hence, the federal system adopted by Nepal must protect the rights of individuals and groups. For every decision that the CA makes on the federal system the question will have to be asked: what implications will it have for individuals, for Nepal and for communities/groups. What additional protective mechanisms are needed to really address these concerns?

6.3 Jurisdictional clarity

Experiences of different federal countries (such as Australia) demonstrate that jurisdictional tensions and conflicts are common when there is no clear definition of jurisdiction (distribution of powers) between the national and sub-national governing units. To avoid such problems, the constitution must clearly delineate between the jurisdictions of the various constitutional bodies, as well as of the different states, the states and the centre, and the states and local governing units. Dispute resolution mechanisms must also be in place to deal with any ambiguities.

6.4 Social divergence

Language, race, religion, social structures and cultural traditions in a federal system must be mutually and simultaneously reinforcing. If some factors or actors negatively highlight cleavages associated with these structures, social divisions mount and cause tension and conflict within and between federal units. In a multicultural federation like Nepal it is important to recognise the languages of the main minority groups. Nepal needs to learn from the intensity of language-related resentment in Pakistan, Malaysia, India and Nigeria. At the same time, however, institutional arrangements must be flexible enough to allow for a needs-based adjustment.

The experiences of Sudan, Sri Lanka and Spain show that political polarisation based on social divergence can lead to separatist movements and that state reactions and counter-reactions can make these demands stronger. There is a sad pattern of conflict escalation: Groups generally start by asking for non-discrimination and political representation. If this is not fulfilled, they demand self-rule. If, again, this demand is not fulfilled, then demands for federalism are voiced. If, again, concerns are not addressed, as a next step, demands for independence may arise. Hence, it is crucial that the governments of the federal units and the centre address these issues at the outset. Imposing identity, language and culture of one group, whether it is ethnic or caste group, over others will serve as perennial source of conflict.

6.5 Institutional arrangements

The nature, types and mandates of the institutional structures of federalism determine their degree and ability to address differences, conflict and tension within the federation. How the institutions accomplish tasks related to the electorate, bureaucracies, political parties, business sector and civil society, and how they deal with political conflict determine whether or not conflicts that emerge from social divergences and cleavages are resolved or escalate. Hence, the ability of institutions and the design of processes to generate cooperative approaches to bring about consensus are crucial to minimise conflict and promote self-rule and shared rule. Ensuring that the issues, concerns and voices of the people within the federal units are accommodated in decisions and that all concerned groups are represented in the legislature, civil service, executive and political party structures is also important. If certain groups are not adequately represented in the institutions of the federal units and centre they feel alienated and may start separatist activities, as observed in East Pakistan, which separated from Pakistan in 1971 to become Bangladesh.

The experiences of India and Nigeria demonstrate that if there are extreme differences between the federal units in terms of wealth and the size of the population this can create tension and stress and led to demands for the reorganisation of the boundaries of the federal units. If one federal unit dominates demographically or economically, tension and conflict between federal units is unavoidable.

7. Conflict resolution mechanisms

The proper functioning of a federal system requires dynamic conflict resolution mechanisms that are open, responsive and flexible. The following are some of the particularly important options or mechanisms for addressing potential conflict between the centre and states, and between states and local governments.

7.1 Inter-state council

Overlaps and interdependences in the use of power and resources between federal units and between the centre and federal units require frequent and often intensive engagement, coordination and collaboration to minimise conflict and tensions. An inter-state council (or council of states) is one of the possible mechanisms for resolving the political nature of conflict and any ambiguities arising between two or more federal units. Although their decisions may not be binding in nature, this mechanism can help to diffuse tension and facilitate collaboration. Such a mechanism may be even more effective in dealing with conflicts of interests, such as conflicts in the content of laws and decrees, which need political agreement. The Inter-State Council of India and the Council of Australian Governments (COAG) are two prominent examples of arrangements to oversee the collaboration process, to deal with potential conflict issues and to make the governing system more effective. Similarly, the Conference of Cantonal Governments in Switzerland has developed a strong collective negotiation with the central government.

Different formal arrangements have been made in different federal countries to deal with intergovernmental financial issues. For example, Malaysia has the National Finance Council, Australia the Commonwealth Grant Commission and South Africa the Financial and Fiscal Commission, which are all active in dealing with financial issues and related conflict.

7.2 Independent thematic commission

The sharing of natural resource among the federal units can generate enormous and frequent conflict between federal units. In such cases, an independent and powerful authority (such as a natural resources commission) established to address issues related to land, water, mines and minerals, hydro-power, and other resources, is necessary. The constitutional creation of a natural resources commission is a useful mechanism for resolving conflict and confusion related to the sharing and use of natural resources.

7.3 Provision for a referendum

Very clear provision for a referendum on highly contentious issues and issues of national importance should be included in the constitution to minimise conflict and strengthen democracy. Although a referendum is a means of conflict resolution, if not properly drafted, it can serve as a majoritarian device, which may divide the population into a majority-minority and serve as source of conflict. Hence, a careful assessment should be made when deciding on a referendum and all other possible options should be explored to narrow the issues for referendum.

8 Dealing with extremes

Some federal countries such as USSR, Yugoslavia and Spain have faced problems of separation. Ronald Watts argues that the constitutions of all federal countries explicitly or implicitly prohibit the unilateral secession of federal units. However, wherever separatist movements appear, they are acting extra constitutionally anyway. In the case of a unilateral decision by a federal unit to secede, the central government often enforces federal constitutions on unwilling federal units. In some cases, such enforcement has resulted in civil war (like in Pakistan in 1971 and Yugoslavia from 1991 to 1995). In others, such enforcement has succeeded in keeping the country intact, such as in the USA (1861-1865), Switzerland (1847 though there was a short civil war) and Nigeria (1967-1970). But, sometimes, secession from a federation happens without bloody conflict or civil war. Malaysia expelled Singapore in 1956 after two years of its inclusion because of political tensions. The separation of Czechoslovakia in 1993 (into the Czech Republic and Slovak Republic) was largely based on the mutual interests of regional parties to separate, and, therefore, they accelerated political polarisation. The separation of Serbia and Montenegro in 2006 was very much guided by the hope of gaining individual membership to the European Union. Various cases of federal countries demonstrate that dealing with extremes requires a combination of political, diplomatic and security approaches, and a willingness by the central government to listen and share more power and resources, as well as the willingness of all groups to cooperate within the country.

Although the risk of secession is often association with federation, it is important to realise that secession or separatist movements can happen in any system. Numerous domestic conflicts and civil wars have occurred in countries with unitary governing systems. Ethnic radicalisation and extremism in multiethnic societies without tolerance and co-existence may contribute to ethnic conflict and may turn into civil unrest.

9. Conclusions

Federalism is not magic to solve all problems. In principle, it is neither bad nor good. Success or failure of federalism depends upon how politicians exercise implementation of federalism.
The basic essence of federalism is a governing system of shared rule and self-rule. Hence, federalism is a governing system in which power is divided between central and sub-national units with delimited self-governing authority. If these principles are internalised many conflicts and tension can be addressed.

The success or failure of federalism in Nepal depends upon the degree of public acceptance of the form of federalism adopted and the degree of implementation of the basic values and process of federalism. Extreme radicalisation of issues and undermining the existence and identity of others will create conflict and make the federal system dysfunctional. Recognition of multiple identities, accommodation of the needs and interests of others, and understanding and sensitivity are some of the fundamental elements required, particularly at the beginning, to operationalise federalism.

The comprehensive work of Ronald Watts (2008) on comparing federal systems across the world highlights that the sources of tension and stress within federal systems are the cumulative effect of different factors and no single condition, institutional arrangement or strategy is responsible. When different social cleavages reinforce each other, the process of polarisation starts and conflict develops. Therefore, one of the fundamental tasks of federal institutions is to address these cleavages before they turn into conflict. Political strategies for effective negotiation can help reduce polarisation; therefore, federal institutions should be designed to create that space.

Federalisation has been used as a means of conflict resolution in many countries in the past few decades. For example, Bosnia and Herzegovina, Sudan, Iraq and the Democratic Republic of Congo all opted for federalism as a way of resolving civil war and armed conflict. One of the big challenges in such a situation is to establish mutual trust and the necessary conditions for a federal system.

Nepal has opted for federal system to end all sorts of discrimination and to promote inclusive democracy. The key actors have to respect each other and all of the different groups and develop mutual trust to collectively work to establish the necessary conditions for the functioning of a federal system. Some researchers, like Daniel Elazar, argue that a federal system with a highly ethnic orientation in a multiethnic society may not be workable and has a high risk of erupting into ethnic conflict and civil war. Nepal must certainly take care in designing its federal system to minimise the risk of this happening.

Reference and selected literature for further reading

Elazar DJ. 1993. International and Comparative Federalism. Political Science and Politics. 26 (2), Pp. 190-195.
Frank T. 1966. Why federations fail: An inquiry into the requisites for a successful federation. New York: New York University press.
Hicks UK. 1978. Federalism: Failure and success: A comparative study. London: Macmillan.
Landau M. 1973. Federalism, Redundancy and System Reliability. The Journal of Federalism. (3) 2. Pp. 173-195.
Panday DR. 1999. Nepal’s Failed Development: Reflections on the Mission and the Melodies. Kathmandu: Nepal South Asia Centre.
Pennock JR. 1995. Federal and unitary government: Disharmony and reliability. Behavioural Science. (4) 2. Pp. 147-157.
Shrestha NR. 1997. In the Name of Development: A Reflection in Nepal. Kathmandu: Educational Enterprise.
Upreti BR. 2009. Nepal from war to peace. Legacies of the past and hopes for the future. Nepal Delhi: Adroit Publishers.
Watts R. 2008. Comparing federal systems. Third edition. Montreal: McGill – Queen’s University Press.