Special remarks on Federalism, Devolution of Power and Inclusive Democracy (Inauguration Programme)

Justice Bhattarai has been serving as a Supreme Court judge since 2016, drawing upon his prior experience as a judge at the Court of Appeal for a decade and his 12-year tenure with District courts. In addition to his extensive judicial career, he holds a Doctor of Jurisprudence (J.S.D) degree from the National Law School of India University, which he earned in 2000. Justice Bhattarai furthered his academic pursuits by attending the Massachusetts Institute of Technology, USA, from 2002 to 2003 as a Hubert H. Humphrey Fellow. During this time, he participated in a program focused on law, human rights, and public policy at the Department of Urban Studies and Planning, Special program for Urban and Regional Studies of Developing Areas. Subsequently, he pursued post-doctoral study and research at the Max Planck Institute for Comparative Public Law and International Law in Heidelberg, Germany, during various periods in 2005, 2006, 2008, 2011, and 2018, benefiting from the Alexander von Humboldt Foundation Fellowship. Justice Bhattarai’s academic qualifications also include an L.L.M in Business Law from the National Law School of India University in 1997. He holds M.A degrees in English Literature (1994) and Political Science (1984), as well as a Diploma in Law (1980), all earned from Tribhuvan University.

Keynote speech on Federalism, Devolution of Power and Inclusive Democracy (Inauguration Programme)

Robert Shenton French was appointed Chief Justice of the High Court of Australia in September 2008. At the time of his appointment he was a judge of the Federal Court of Australia, having been appointed to that office in November 1986. He graduated from the University of Western Australia in science and law. He was admitted in 1972 and practised as a barrister and solicitor in Western Australia until 1983 when he went to the Western Australian Bar. From 1994 to 1998 he was President of the National Native Title Tribunal. At the time of his appointment he was an additional member of the Supreme Court of the Australian Capital Territory and a member of the Supreme Court of Fiji. He was also a Deputy President of the Australian Competition Tribunal and a part-time member of the Australian Law Reform Commission. From 2001 to January 2005 he was president of the Australian Association of Constitutional Law. Chief Justice French was appointed a Companion in the General Division of the Order of Australia in 2010. He is an Adjunct Professor at the Law School at the University of Western Australia, a Distinguished Honorary Professor at the Australian National University and an Adjunct Professor at Monash University Law School. He was elected as Chancellor of the University of Western Australia in December 2017.

Nepal’s Experience with Constitutional Bench in the Supreme Court as a Federal Dispute Resolution Mechanism: Problems and Perspectives

Excerpts: The Constitutional Bench in Nepal, established under Article 137 of the country’s Constitution, plays a crucial role in interpreting and adjudicating constitutional matters, particularly those related to federal disputes. This specialized bench within the Supreme Court of Nepal is responsible for resolving disputes arising between different levels of government within the federal structure of Nepal.

The establishment of a Constitutional Bench is a common feature in federal systems of governance, aiming to provide a forum for resolving disputes and ensuring that the constitution’s provisions are interpreted consistently. Such a mechanism helps maintain the balance of power and jurisdiction among various tiers of government and contributes to the stability and functionality of a federal system.

The effectiveness and perceived impartiality of Nepal’s Constitutional Bench may vary depending on individual opinions and specific cases that have been brought before it. However, it serves as an important institution for addressing federal disputes and upholding the principles of federalism outlined in Nepal’s Constitution. The Constitutional Bench in Nepal, like any judicial institution, has been encountering various challenges and problems in its functioning. Some of the common issues and challenges that it has been facing are interpretation of federal provisions, lack of legal clarity, public perception, procedural matters, backlog of cases, and resource constraints.  

As legal and constitutional issues evolve over time, the Bench may need to adapt and address new and emerging challenges. There is also a point of view that the idea of Constitutional Bench should be scrapped, and the whole Supreme Court be developed and recognized as an inclusive constitutional court. The effectiveness of the Bench in addressing these challenges depends on various factors, including the commitment to the rule of law, the judiciary’s independence, and the quality of legal reasoning in its decisions.

Economic Constitution and Federalism: Some Inherent Problems and Practical Solutions in Nepalese Context

Excerpts: In recent years, an increasing number of constitutional law scholars have started examining and analyzing constitution as an economic document. They claim that whether or not a particular constitution specifically states it in its text, each constitution has an inherent economic vision reflected in the overall constitutional design, rules and interpretation. In this sense, federalism itself may be a byproduct of such economic vision, as it may have been advocated for or so designed within the constitutional framework to serve certain specific purposes of that vision. The new Constitution of Nepal promulgated in 2072 BS (2015 AD), which converted Nepal into a federal state from a traditionally unitary state, openly declares Nepal to be a Socialism-oriented State in Article 4. This constitutional provision may indicate socialism as the basic economic vision of the Constitution. However, to reach such a conclusion may be premature without analyzing the overall constitutional design, rules and institutions.

Against this background, the purpose of this paper is to examine the economic constitution of Federal Democratic Republic of Nepal as reflected in the overall design and detailed rules stipulated in the text of the Constitution of Nepal, 2072. To this end, this paper will first look into the principal economic rationales and explanations available in the existing literature for the origin of federal states. It will also look into the key constitutional principles on institutional arrangements and allocation of power and decision-making authority in federal states, which may be relevant from the perspectives of such rationales and explanations. The paper will, then, analyse the constitutional design, rules and institutions of Nepal on the basis of these economic rationales. Finally, it will reflect on the issue of whether or not the Constitution of Nepal offers a well-articulated and coherent basic economic vision.

Inclusive Federalism in Nepal: Reality or a Myth?

Abstract: The paper’s objective is to examine the constitutional provisions concerning inclusive governance and their practical implementation in Nepal. Additionally, it will assess the execution of constitutional measures related to inclusive federalism.

The 2015 Constitution of Nepal stands as the culmination of a decade-long conflict and numerous grassroots movements aimed at transforming society as a whole. A key aspect addressed through the constitutional discourse was the restructuring of the state. The comprehensive peace accord, which served as a blueprint for social inclusion and gender equality, has played a pivotal role in guiding normative frameworks, including the constitution. The constitutional elements that encompass inclusive democracy via a federal structure, republicanism, the rule of law, and equity-driven equality, along with frameworks such as National Human Rights Institutions (NHRIs), constitutional oversight bodies, and an independent and competent judiciary, constitute the essential pillars that can significantly contribute to social transformation when implemented with accountability. Furthermore, the Government of Nepal has exhibited a profound commitment to international human rights frameworks, participating in seven out of nine major international human rights conventions/covenants. Nepal has consistently accepted a substantial number of recommendations through universal periodic reviews and actively engaged in the implementation of the Sustainable Development Goals (SDGs) for 2030.

Both the judiciary and NHRIs have issued numerous decisions in response to public interest litigations and complaints concerning social justice, socio-economic issues, and the civil and political rights of women and marginalized communities. The constitution and other normative frameworks establish the foundational groundwork and an enabling environment for necessary actions, fostering trust and raising expectations toward the state. Failure to uphold commitments outlined in these frameworks could result in a critical situation.

Analyzing the trends in the federal structure concerning the fulfillment of constitutional commitments regarding social justice and transformation reveals several existing issues. Some of these issues pertain to accountability, while others, notably those deeply rooted in a defective and caste-based social structure, are critical. While the proportional electoral system, social justice as a fundamental right, inclusive representation in decision-making, and affirmative action for women and marginalized communities are expected to be institutionalized as per the constitution, there are shortcomings. The proportional electoral system appears to disproportionately benefit elites and women from so-called higher social classes and castes. An intersectionality approach is lacking, and the allocation of proportional representation seats to marginalized communities has not been implemented faithfully.

Local governments tend to prioritize infrastructural development, often neglecting social justice and social transformation in their work plans. Their service delivery methods are conventional and lack an inclusive approach. High enrollment rates in schools are insufficient without addressing the equally important issue of student retention, particularly among girls and students from marginalized communities. Efforts aimed at addressing structural discrimination and enacting affirmative/protective provisions for women and marginalized communities appear to be lacking. While numerous laws have been enacted, only a meager number directly contribute to the empowerment of these groups. Lastly, there is a concerning trend regarding the representation and participation of women and marginalized communities in decision-making processes. They are predominantly considered for proportional representation, which is often inadequately implemented and highly politicized. Beyond the legislature, the representation of these groups in other state entities is significantly neglected.

The paper will conclude by offering recommendations for action points that should be considered by state authorities and constitutional bodies. Development partners, stakeholders, and civil society organizations will also need to formulate a unified action plan to support the government in combating discrimination. Until discrimination in any form is eradicated, it will continue to undermine the trust of marginalized communities in the ideals of inclusive democracy.

Intergovernmental Coordination and Cooperation in the Federal System of Nepal: Flagging Some Experiences

Abstract: The establishment of federalism can involve two distinct processes: aggregation, where preexisting states unite to form a federal state in pursuit of common interests, and dis-aggregation, which involves dividing a single state into multiple political units to promote unity and safeguard territorial integrity. Nepal falls into the latter category, having transitioned into a federal state. The Federal Constitution of Nepal primarily serves as a national compact aimed at securing peace and addressing regional, class, and ethnic conflicts. Since its implementation, Nepal has held two general elections under this federal framework, yet a growing discontent persists between two major factions: the nationalists advocating for a centralized “one nation, one country, one government” approach and the federalists seeking regional autonomy, increased provincial power, and recognition of ethnic aspirations.

This divide is fueled by the nationalists’ concerns about the escalating costs associated with managing a three-tier government structure and the federalists’ reservations about the continued central government’s control over resources and powers that were originally intended for the provinces. The underlying conflict between these two forces continues to exert significant pressure on federal politics. In this context, we delve into the origins of this tension, explore the reasons behind the incomplete realization of fundamental values enshrined in the federal constitution, such as inclusion, secularism, republicanism, self-rule, and shared rule, and examine the factors contributing to their hesitant acceptance by the ruling elite.

Furthermore, we analyze how these dynamics impact intergovernmental coordination and cooperation within Nepal’s federal system and consider potential political reforms to address these challenges. This discussion seeks to shed light on the complexities of Nepal’s federal journey and propose strategies for mitigating dilemmas in the Federal System of Nepal.  

Strengthening Intergovernmental Relations and Collaborative Federalism in India

Abstract: Federalism in India as opposed to Federalism in the USA (based on dual federalism which necessitates exclusive jurisdiction) was essentially established on the model of cooperative federalism (based on shared jurisdiction between the centre and states). Early federal constitution framers, influ-enced by classical dual sovereignty, did not view intergovernmental forums as necessary. However, the authors of India’s Constitution recognized the necessity of intergovernmental forums in the federal structure. During the Constituent Assembly deliberations, there was agreement to establish inter-governmental forums like Inter-State Council(ISC) & National Development Council. The return of a single-party majority government at the Centre in 2014 necessitates the strengthening of inter-governmental forums to ensure that the federal system functions smoothly. There is a significant need to empower institutions like ISC and make them more engaging, inclusive, transparent, and respon-sible. Moreover, there are several illustrations of working of cooperative federalism in India, the most prominent one being the Centrally Sponsored Schemes formulated and initiated by the central gov-ernment but the implementation involves multiple actors. Furthermore, the COVID-19 epidemic had presented government systems worldwide with a significant and challenging experience. The resolu-tion of such a crisis necessitated a collaborative effort between federal government and sub-national units in order to effectively coordinate policies. This is the framework of Collaborative Federalism  which requires both the cooperation between the central government and the state governments and an active collaboration between multiple actors including civil society organisations. It is the concep-tualization of a cooperative and equitable relationship between different levels of government. Inter-governmental mechanisms, both formal and informal, like Inter-State Council, National Development Council, Zonal councils, Chief ministers conferences, Governing Council of NITI Aayog,GST Coun-cil etc should be strengthened to ensure the spirit and working of Collaborative Federalism.

Reflections on the Australian Federal System of Government: Operations, Benefits and Limitations

Abstract: Federalism in Australia is an enduring system of government which has served Australia, a large and diverse nation, for 125 years. Six states and two territories operate under a written constitution, which does not include local government.

Its operations have been tested and it is not always popular, but it is durable. There is now little serious inclination to introduce large-scale reform, though efforts have been made in the past. The system is settled.

The federal system has survived wars, pandemics, and natural disasters with mixed success. Its operations have evolved to meet new circumstances and the aspirations of different political leaders and political movements and parties. This evolution has only rarely involved formal constitutional change, but rather has come about through judicial interpretation and executive cooperation.

Its benefits include the flexibility to deal with regional differences, including economic and financial disparities, and to respond to local cultural differences and varying needs. Mechanisms exist to meet the different needs of regions and to balance economic disparities.

Its limitations, demonstrated during the recent Covid-19 pandemic, can involve inter-jurisdictional gaps and conflicts and an inability to resolve regional self-interest in pursuit of a common good. While the system encourages regional innovation, the downside can come in failures in national leadership and coordination at times of crisis.

Constitutional Legal Framework of Equitable Distribution of Fiscal and State Resources in Indonesian Federalism: Problems and Solutions

Abstract: The presentation on the “Constitutional Legal Framework of Equitable Distribution of Fiscal and State Resources in Indonesian Federalism” will explore the constitutional provisions governing resource distribution in Indonesia’s present constitutional system and the federal system in the past. It identifies pressing problems, including regional disparities and transparency issues, and proposes a range of solutions, drawing from international best practices. The presentation delves into the present constitutional framework, outlines key challenges, discusses potential political and social implications, and invites audience engagement to foster a deeper understanding of this critical aspect of Indonesian federalism. I will also try to relate with Nepal’s ongoing federalization process.

Women and Inclusion in Nepal’s Federalized Governance: Tasks Unfinished

Abstract: Inclusion is one of Nepal’s pervasive issues/agenda in the Nepalese concept of federalism under the 2015 Constitution of Nepal. To address the inclusion agenda, the Constitution has outlined a comprehensive framework that includes four key factors: the concept of equal citizens, social protection, the market, and the rule of law. 

Nepal has adopted the federal state structure to effectively and efficiently executive the framework, ensuring the devolution of state power. However, a grave misconception or limited understanding of inclusion has posed challenges to addressing the historical marginalization and exclusion in Nepali society. For instance, while talking about inclusion, most studies/reports have primarily focused on understanding inclusion from caste and ethnic perspectives, with the view to increase their participation in the state mechanisms. Indeed, this perspective is essential but not comprehensive to understand the historical issues of exclusion & marginalization in Nepali society. Notably, this concept misses the intersectional dimension, multiple forms of discrimination, exclusion, and barriers, and its implications in strengthening decentralized governance from a holistic approach of inclusion in local governance.

The country’s fundamental law broadly guides and requires compatible policy decisions and social practices. The 2015 Constitution and its first amendment are critical in developing a common framework for development partners and operationalizing the concept. The 2015 Constitution provides a model of inclusion that includes gender equity/equality as well. Unless properly appreciating the Constitution’s model, no other models would retain legitimacy and validity. On top of that, the federal modality of governance envisioned by the Constitution and the power sharing mechanism among different levels of governments and institutions need to be adequately assessed to offer a valid inclusion framework.

In this context, my paper presents a holistic approach to analyzing inclusion in decentralized governance with reference to the following outlines: 

(I) Constitutionalist Framework: Any policy framework disconnected from constitutional analysis and its modality or faulty approach would not be productive. Despite some weaknesses, the 2015 Constitution can provide a significant impetus and leverage to reorient the inclusion framework.

(II) Parochialism: Often, the past analyses of social inclusion have been victims of the parochial approach and methodology of investigators. For example, hardly any past studies have adopted the four propositional models discussed above, i.e., equal citizens, universal social protection, robust market, and the rule of law. Past studies have often ignored/least prioritized the paradigm of modern civic states, constitutionalism, and global constitutionalism in giving direction to inclusion along with the intersectional dimension of gender equality.

In this connection, the paper focuses on concept analysis, analysis of institutional gaps, governance approach for mainstreaming the inclusion framework, system building, and institutional development in operationalizing the road map. Specifically, the following issues will be explored:

(a)To review critically the government and development partners conceptualizing and using the inclusion approach in Nepal;
(b)To analyze institutional gaps for effectively mainstreaming the inclusion;
(c)To explore inclusion from a Gender perspective;
(d) To analyze the gaps and positive practices that ensure marginalized voices are heard and included in decision-making processes within decentralized structures, fostering a truly representative and participatory democracy; and 
(e) To develop an operational guideline (a road map) for effectively mainstreaming the constitutional framework of inclusion .

The Constitutional Bodies: Assessing the Role of Nepal’s Fourth Branch in Supporting Constitutionalism in Federal Transition

Abstract: The modern executive is increasingly subject to the scrutiny not only of the legislature and the judiciary but also various non-judicial regulatory and oversight institutions. These bodies operate independently from the other branches of government and are designed to guarantee that key constitutional promises will be respected over time. Scholarship increasingly considers these bodies to constitute a ‘fourth branch’ of government — so-called because they do not neatly fit into the traditional tripartite division of the executive, legislature and judicial branches. The incorporation of the fourth branch into contemporary constitutional design is now so common that it has been remarked that these institutions are now ‘considered among the core elements of modern constitutionalism’.

Nepal’s 2015 Constitution follows this global trend of elevating the fourth branch in constitutional governance. The place of previously established bodies – the Election Commission of Nepal, the Commission for the Investigation of Abuse of Authority, the Auditor General, and the National Human Rights Commission – has been maintained, while fresh constitutional roles have been designated for eight new constitutional bodies, including the National Natural Resource and Fiscal Commission as well as seven ‘Other’ commissions, which have mandates to protect and promote the rights of specific marginalised and minority groups.

Individually, these constitutional bodies are designed to assume various independent regulatory and oversight roles, including managing essential functions of the state; constraining opportunistic behaviour, and supporting the rule of law; and promoting and protecting rights, inclusion, plurality, fairness, equality, and justice for the country’s heterogeneous population. Combined, the constitutional bodies have an important role to play in constraining government and structuring the state to better effectuate the fundamental principles of the 2015 Constitution – that is, central to the purpose of Nepal’s constitutional bodies as a collective is giving effect to constitutionalism as a value and as a practice of government.

This paper examines the extent to which the establishment of Nepal’s constitutional bodies has supported this fundamental purpose – namely, the institutionalisation of constitutionalism. In assessing this impact, the paper contributes to our understanding of the role of the fourth branch throughout the ongoing process of constitutional implementation and consolidation in federal Nepal. More broadly, it also sheds light on the characterisation and place of the fourth branch during federal constitutional transitional.

Current trends in Nepali Federalism: Are the provinces becoming weaker than the Constitution envisaged?

Abstract: The 2015 Constitution of Nepal envisaged a federal Nepal with governments at three levels: local, provincial, and federal. Federalism, as generally understood around the world, entails independently powerful provincial or state governments. Strong local governments are not unique to a federal system, as evinced by, for example, strong local governments in the unitary United Kingdom. By contrast, strong and independent regional (provincial) governments are a distinguishing feature of federalism. For example, Australia, Germany, India, and the United States all have strong and independent state governments that have important exclusive responsibilities in health, education, and infrastructure and they have access to substantial revenue sources including taxes, duties, and resource royalties.

Currently, as Nepal is in the process of giving shape to its federal structure , provincial governments appear to be getting significantly less power and independence than what the Constitution envisaged and what their international counterparts possess. This is worrying for the federal project. Current legislators might point to the strength of local governments in Nepal as signs of a blossoming federalism but, as aforementioned, strong local governments are not sufficient for a strong federal system. Strong provincial governments are essential.

Analysts often point to ‘political will’  (or the lack thereof) when discussing the success or failure of political reform processes. Moreover, ‘political will’ is often linked to incentives, barriers, and the motives of political leaders by scholars. Federalism in Nepal was the result of a contingent event – the uprising in the Madhesh . The political forces that pushed for a federal arrangement (during the time of state restructuring) were mainly the Madhesi parties, CPN-Maoists, and political activists of the country’s indigenous population. For them, their desired form of federalism was identity based. In other words, the ‘political will’ to bring federalism to Nepal rested on the idea of self-determination. The two main political parties of Nepal – Nepali Congress and CPN-UML – maintained a lukewarm stance on federalism throughout the constitution-making process and formally adopted a pro-federalism position because not doing so involved significant electoral risks (International Crisis Group, 2011, 13). With a strong push (political will) from the Madhesi movement and the CPN-Maoists, which were both in the ascendancy in the lead up to the promulgation of the 2015 Constitutions, and with lukewarm acceptance by the two main parties, the 2015 Constitution restructured the nation into seven provinces based on identity and capability.

Both the CPN-Maoists and the Madhesi parties have seen a decline in their electoral fortunes since the promulgation of the Constitution in 2015. This was particularly pronounced in the latest general election in November 2023, with CPN-Maoists and Madhesi parties losing a large chunk of seats in the federal parliament. Given the current weakness of the parties that fought for federalism in the lead-up to the Constitution, and given the rise of anti-federal political forces (Rashtriya Swatantra Party and Rastriya Prajatantra Party), it is not surprising that many analysts see a lack of ‘political will’ for building a strong federal system with strong and independent provincial governments. The current power dynamics favour the continuation of the pre-federalism set-up of strong federal and local governments but relatively weak provincial governments. At the same time, few parties have called for the outright rejection of federalism. We use historical institutionalism to analyse how past events, power dynamics, institutional arrangements, and the current structural context have played their part in the weakening of provincial governments and what possibilities there might be for a reversal of fortunes for federalism.

Equalization Payments and Fiscal Fairness in the Federal System of Pakistan

Abstract: Equalization payments are intergovernmental transfers from the central government to subnational governments to reduce regional disparities in fiscal resources and ensure that all provinces have a minimum level of resources to finance essential public services. They are also important for achieving decentralization and devolution of power, which are essential for the health and stability of a federation. Equalization payments are used in many countries, such as Canada, Germany, Australia, but the legal and political framework for redistribution may vary.

In Pakistan, the National Finance Commission (NFC) is responsible for determining the distributive formula i.e. NFC awards for allocating financial resources, both horizontally and vertically. Pakistan’s federation has historically been centralized, with federal government holding substantial power over tax revenue collection, distribution and the tax base. This has made the conclusive determination of NFC awards a contentious issue between the centre and provinces, as well as between the provinces. 

Until the 7th NFC award in 2010, the previous awards were being made upon a unifactored formula based on population alone. The 7th NFC award, for the first time, introduced a multifactored formula that included population, poverty, revenue collection and inverse population density. This was a positive step towards fair fiscal federalism, but challenges remain. The failure to reach consensus on subsequent issues rendered inconclusive 8th and 9th NFC awards. It is argued that while this failure may have economic outlook, its causes were mainly political. 

In summary, this paper will outline the historical background of fiscal federalism in Pakistan, focusing on the issues surrounding redistribution and the efforts that are needed to address the challenges. It will specifically focus on the NFC award and its significance as an instrument of equalization payments to bring fiscal fairness to the federation of Pakistan. It will conclude with policy recommendations to address current and future challenges.

Innovations in Resource Allocation in a Federal System: Technology, Data and Transparency

Abstract: The Finance Commission of India is a constitutional innovation that has helped build and strengthen India’s federal structure. Its recommendations on allocation of financial resources between Union and State governments are generally accepted in their entirety by union governments irrespective of party in power. However, State Finance Commissions which are supposed to perform the same function vis a vis State and local bodies have been less than effective in the same respect. This paper will try to look at underlying issues arising out of the constitutional design of these institutions and what can be done to address their shortcomings. At the same time, thanks to the introduction of the Goods and Service Tax, there is availability of high volume data that can help the way in which tax resources can be most efficiently allocated to the parts of the country which need it the most. This paper briefly explores how this might be possible in the Indian context and what relevance it could hold for Nepal. 

Ethnic and Political Inclusion in the Federal Parliament. An Analysis of the 2022 House of Representatives elections

Abstract: The paper discusses the legal framework for the elections and the actual results of the 2022 HoR elections regarding ethnic and political inclusion. The author has followed all election from 2008 and draws the lines from the two Constitution Assembly (CA) elections though the two elections held after the 2015 Constitution was adopted. According to the 2007 Interim Constitution, the CA had 601 elected under a mixed electoral system (except for 26 appointees) with 60 % elected under a system of proportional representation (PR) and 40 % under the plurality system first-past-the-post (FPTP). Quota rules for ethnic groups were applied to the PR elections. By the 2015 Constitution, the number of seats were reduced to 335, out of which 40 % should be elected under PR and 60 under FPTP. Quota rules were still in place but with a lower share of PR, the rules had a weakened effect.

The paper will compare the results of the three previous elections with the 2022 one regarding both the political representation and ethnic inclusion and will discuss the legal framework for the same.


Fiscal Federalism of Nepal: A Perspective on its Practice

Abstract: The promulgation of Nepal’s federal constitution has completed its eight years. The implementation of the fiscal federalism as envisaged by the constitution started only after the elected executives took respective offices in all three tiers of the government; namely the federal, provincial and local. Elected bodies (legislatures) in all three levels completed their first five year term out of the first election and two out of five year tenure was also completed after the new set of representatives were elected. The practice of fiscal federalism, along with other key pillars of the federal system, has provided key insights into strengths and weaknesses of Nepal’s federal design and its fiscal implications on legal, institutional and operational aspects of fiscal federalism. Both vertical and horizontal fiscal imbalances across the federal entities exhibit an unsustainable level of asymmetries in financial capabilities among the subnational units. The revenue assignment function of the state appears disproportionately skewed as the consequence of unequitable transfer of tax-points while creating the subnational political units, mainly the provinces. Although a marginal progress in expenditure efficiency is gradually transpiring, mobilization of own-source revenue still appears to be the far cry for the vast majority of the local levels. The Public financial management and ability to manage particularly own municipal (provincial) economy as an independent jurisdiction by the local (and provincial) levels are in dire need of infusion of professional skills among the elected representatives and civil servants alike, This need is more pronounced in far-flung areas. This exploratory paper takes a comprehensive approach to evaluate the legal, structural, institutional and operational aspects of the implementation of fiscal federalism during the last seven years and recommends some possible reforms with an aim to increase efficacy of fiscal governance suitable to the federal dispensation.

How Coalitional Politics Undermines Federalism in Nepal

The 2015 Constitution of Nepal envisages a federal Nepal. The transition from being a unitary system of government to a federal system commenced symbolically with the promulgation of the Constitution and materially with local, provincial, and federal elections in 2017. While Nepal has had both local and national-level elections before 2017, the 2017 provincial elections were novel and represented, more than anything else, the arrival of federalism in Nepal. In this sense, a successful transition to federalism in Nepal arguably hinged more than anything else on the successful establishment and effective functioning of provincial parliaments and governments. By definition, federalism, in contrast to a unitary system where power is ultimately concentrated in the hands of a national-level government, involves a division of power between federal, provincial (state), and local governments. Division of power implies a certain degree of independence. From a historical perspective, successful federalisation in Nepal can thus essentially be defined as granting a certain degree of independence and discretion (along with commensurate resources and capabilities) to provincial and local government. In other words, successful federalisation in Nepal would have to involve the national-level government giving up some of its power and structurally allowing provincial and local governments a level of autonomy in accordance with the provisions of the 2015 constitution. 

Given that Nepal is a multi-party democracy, this transfer of power from the national level to the provincial level and the local level needs to happen not only between governments but also within political parties. The constitutionally mandated level of independence of provincial and local governments from the federal government is hard to achieve without the independence of province-level and local-level politicians from national-level party organizations. In other words, the independence and autonomy of provincial and local governments are likely to be compromised if elected officials are subservient to the national-level leadership of their respected parties. While, notionally, there can be situations where electoral outcomes are divergent enough between the federal, provincial, and local levels that distinct parties and party coalitions (not to mention independent politicians) end up heading federal, provincial, and even local governments and accordingly secure a level of autonomy and independence, the reality of Nepali politics often defies this possibility. This is because of the long-standing norm of multi-party coalition-building in Nepal where the ruling coalition tends to include a large enough proportion of votes and seats, both federally and provincially, that the ruling parties at the national level are able to dictate, or at least strongly influence, the formation of provincial governments (for example, upon the resignation of prime minister KP Sharma Oli from the federal PM in 2021, all the provinces except the Madhesh province saw changes in their leaderships – with the chief ministers and ministers in the provincial government reappointed based on the directions of the top leadership of the three main political parties). The process of coalition-building in Nepal is distinct from Western democracies, where ideology and historical relationships between parties often play at least some role in negotiations to form coalitions. In Nepal, it is not unusual for coalitions to form between parties from the opposite sides of the political spectrum (as per their prima facie political leanings and manifestoes) as political expediency almost invariably tends to take precedence over ideological and historical compatibility. 

Candidates for provincial and local elections for at least the three major parties – Nepali Congress, CPN-UML, and CPN-Maoist Centre – and often minor parties as well tend to be hand-picked by the party leadership at the national-level. Most party organizations in Nepal are national with only a few minor regional parties having province-level or local-level party organizations. Even if not hand-picked, province-level and local-level political candidates are usually wary of defying party leadership for fear of losing their ticket in future elections. Although there have been recent instances of province-level and local-level elected officials defying the party leadership (for example, in the recent provincial general assembly, the party president of the CPN-UML gave stern warnings to aspiring provincial leaders to select provincial leadership via consensus and not via election, however, elections were held in all seven provinces and provincial leadership thus elected), such defiance is still the exception rather than the rule. By and large, elected officials at the provincial and local levels tend to be subservient to the party leadership at the national level, losing their autonomy and independence in the process.

In this paper, I interrogate the power dynamics between elected officials at federal, provincial, and local levels in the context of Nepali coalitional politics so as to assess the state of federalism in Nepal and to identify potential routes to the political autonomy and independence of local and especially provincial governments. The current state of federal politics in Nepal can be attributed to a substantial degree to both national-level and organization-level institutions – the norms of coalition-building in Nepal, standard procedures within party organizations that discipline party members, the lack of clear party leader succession criteria and the resulting long tenures of party leaders (which facilitates politically-expedient coalition-building), and so on. For this reason, I use historical institutionalism as my theoretical framework to analyse the aforementioned power dynamics and the independence (or lack thereof) of provincial and local levels of government. While sociological institutionalism tends to be ‘oversocialized’ and arguably gives too much weight to structural factors and too little weight to agency and while rational choice institutionalism tends to be ‘undersocialized’, usually putting too much faith in the discretion of agents, historical institutionalism tends to view political actors as ‘situated agents’ who while constrained to an extent by institutional and wider structures also have some ‘agential space’ to bring about institutional change where practicable. As we will see, elected officials at provincial and local governments in Nepal are clearly constrained by institutions but there are also examples of defiance, given the right institutional and structural enablers (such as favourable regional power dynamics and electoral support), which point to the possibility of substantive institutional change including the political decoupling of national and provincial party organizations. Historical institutionalism also takes into account the wider structural context, which helps further explain the present situation in Nepal including the presence of certain institutions. For example, the political-economic context of Nepal, where the prospects for earning good income through employment or entrepreneurship are relatively low and where politicians often rely on income via politics, creates an over-reliance on party organizations (including resources such as campaign funds) and gives structural power to party leaders over province-level and local-level party members to an extent that is perhaps greater than, say, in Western federal democracies.

Equitable Distribution of Fiscal and State Resources in the Federal Malaysia and the Recent Learning

Abstract: The Federal Constitution contains division of revenues between the federal and the state governments in Malaysia. Vast of the revenues go the federal government while the States’ revenues are outlined in the Tenth Schedule of the Federal Constitution. According the stipulated constitutional provisions, the Federal Government is responsible to provide certain grants to the state governments. Brief perusal of the relevant constitutional provisions indicates that the allocation of revenues between the two levels of governments are heavily centralized leaving the state governments highly dependent on the federal government. Despite a very central-bias distribution of revenues, this paper intends to explain important lessons that can be elucidated from six decades of Malaysia’s fiscal federalism. In addition, there are areas of improvement that need to be ironed out between the federal and the states government in Malaysia. Some important lessons will be outlined and elaborated in this paper. In addition, a few crucial issues in the federal-state fiscal relations will be analyzed. This paper concludes with some thoughts and recommendations.

A Brief Commentary on Intergovernmental Coordination and Cooperation in Federal Nepal within the Context of Local Levels

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