Restructuring of State: Slogan of Decentralization Under Centralized Leadership

Keshab Poudel
July 10, 2008

"Economic, geographic and political feasibility notwithstanding, political leaders with centralized mindset in each party including Madhesis are negotiating to resolve the issue of dispensing power to federal states, which they are temperamentally not prepared to do. Amidst the Madhesi Andolan of February 2007, the interim constitution has already accepted Nepal as a federal, democratic republic. Despite declaring Nepal a federal state, political leaders are still confused on what kind of federalism Nepal is going to have and what model will they adopt. The recent political deadlock between the seven party alliance and three Madhesi parties indicate that choosing the modality for federalism is a tricky issue"

"We will continue our struggle till three political parties do not agree on One Madhes One Province with complete autonomy," said Rajendra Mahato, president of Nepal Sadvavana Party. "Only a Madhes as a single Pradesh (province) can ensure the right of the Madhesis. Madhesi people want to end century-old Pahadi domination and discriminations. We want all 20 districts of Madhes from east to west under a single province."

There are other groups within Madhes, who oppose the demand of three major parties of Madhes. "There do not exist Madhes anywhere in Nepal. Declaring Madhes as a single state would be against the sentiments of indigenous people of terai. If this government declares Madhes as a single state, we will launch decisive struggle against it," said Raj Kuma Lekhi, leader of Tharu Kalyankari Sabha.

"In the name of one Madhes one Pradesh some want to build another centralized state in Terai," said Lekhi, who leads a strong ethnic group of southern plain. This Tharu community is scattered from east to west of Nepal.

"There is no question of accepting the demand of one Madhesh one Pradesh," said CPN-UML leader Jhalnath Khanal. "This demand intends to break Nepal."

After the amendment of the interim constitution in March 2008 following the Madheshi agitation, which Maoists openly accused India of supporting, the demand related to federal autonomous regions have been raised by various groups.

All the groups have their own agenda as some want state restructured on the basis of language and ethnicity while others want it done on the basis of geography. Country's three major political parties, which have decisive strength in the constituent assembly, have advocated different versions. Maoists have already divided Nepal on the basis of ethnicity. Nepali Congress is yet to open its mouth while CPN-UML wants several federal states in terai as well as in hill and mountains.

In the last election, three major Madhesi political parties contested the election on the slogan of one Madhes and one Pradesh with major national parties but they secured just over 15 percent popular votes in Terai. In fact, overwhelming majority of the people of the region rejected their slogan. However, their numerical presence in CA was enough to stall the house proceedings for last two weeks.

"We need to strengthen local governments like village development committee, municipality and district development committee even under the federal system and there is a need for constitutional guarantee for local government," said Dormani Poudel, former mayor of Hetauda Municipality and president of Nepal Municipality Association. "Before carving the federal states, the government must decide the fate of local government. Only through the devolution of power to local government, can one ensure effective empowerment."

External Dimension
Sandwiched between two major powers of Asia, India and China, Nepal's restructuring is a matter of great concern for both the neighbours in terms of their own security.

India's renowned Nepal expert and professor of Jawaharlal Nehru University S.D. Muni writes, "Nepal is generally in harmony with the external context where accepted consensus is in favour of democratic institutions, multi ethnic societies and liberal open economics."

According to Muni, there is a need to look at the greater strategic, political and economic interest of neighbour in the process of state restructuring. He argues that Nepal cannot ignore India's genuine security and strategic interest in the process of state restructuring.

Chinese scholars - who rarely speak on Nepal's internal political process – have also shown their interest in Nepal's ongoing debate on restructuring. "Instead of ethnicity, Nepal should be divided under the basis of geography. Only this kind of federal state will make Nepal a strong and modern nation. China always supports Nepal remain a sovereign, independent and unified nation," said Chinese scholar professor Wang Hongwei.

As Nepal's two neighbours are keenly observing Nepal's restructuring process, the country is not in a position to undermine their security and strategic interests. Although Nepal's political parties have already accepted the agenda of federalism, it is doomed to fail if it goes against long-term strategic interest of Nepal's neighbours.

"The slogan of federalism is just a strategic slogan to fulfill the interest under a grand design," said a political analyst. "It is a completely inconceivable thing coming from those political parties whose leaders have completely centralized powers in their hands," said the analyst.

Beginning of Federalism
Federalism is a word of multiple meaning and diverse hues and colors. Basically, it is a concept of devolution of power and sharing of decision making authority between at least two, if not more, institutions of governance.

Nepal has a long experience of local self government concept but they were not given adequate economic, legal and other powers. After the promulgation of local self governance act in 1999, local governments were also given quasi judicial and economic rights. The new decentralization schemes also put all central level district offices under District Development Committees.

Although the interim constitution has not made any provision in the process of state restructuring, it was incorporated following sudden outburst of violent agitation in Terai. After the first amendment of interim constitution in April 2007, the country has turned into a federal country.

An Opinion Poll conducted by Interdisciplinary Analysts in March 2008 revealed that over 66 percent of population have not heard about unitary or federal system. The report found that only 23 percent of respondents had heard about unitary or federal system. The report said that majority of Nepali people still have not heard about the terms.

According to India's prominent constitutional lawyer Dr. Abhishek Singhvi, no single test may yield a satisfactory sub-division in a multi-ethnic, multi lingual and multicultural society like Nepal.

But inside Nepal, the debate on criteria has not been seriously carried out yet. Can Nepal cope with 9 autonomous regions as proposed by Maoists or one Madhes one Pradesh by Madhesis? There are several such tricky questions.

"None of the political leaders and their organizations have any concrete idea on federalism and devolution of power. Donors from western democracies have been helping several NGOs create awareness about federalism in the ruling leadership as well as opinion leaders of the country," said a political analyst. "But the politicians don't have time to think seriously these things and their main concern is to be in the forefront of leadership at the cost of others and to get upper hand in exercising state power. None of the seven party leaders have any concrete idea about the shape of the future constitution and ingredients of restricting the state into federal units."

In fact, that is the real task of any political party contesting for power. All those superfluous and high sounding slogans were there to arouse the mass support in their favour. They will continue doing that just for the sake of power not for their materialization.

Economic Study
At a time when Nepal has been facing several economic challenges, nobody has any idea how federal states will deal with those issues. Given the limited resources and competitive market, there lies a major economic challenge of distribution of resources as well.

Under the support from DFID (ESP), Society for Constitutional and Parliamentary Exercises (SCOPE) has recently conducted a study on fiscal aspects of federalism in Nepal.

Prepared by former vice chairman of National Planning Commission Dr. Shankar Sharma, the paper intensively studies Nepal's fiscal system and its current trends on the basis of fiscal year 2063/64.

According to the Economic Survey of 2063/064 (2006-07), the government collected total revenue of Rs, 72.28 billion in fiscal year 2062/063; Rs. 57.43 billion as tax revenue and Rs.14.85 billion as non-tax revenue. Out of this, Rs. 15.34 billion were collected from custom duties, Rs.28.11 billion from VAT and Income tax and 21.8 billion from land and registration fees, respectively.

According to Dr. Sharma, among the collections of revenue, Kathmandu had the highest contribution with 41.2 percent of total revenue generation. Parsa which includes the Birgunj custom contributed 24.8 percent and Morang, Rupandehi and Jhapa collectively contributed 14.2 percent, while Sindhupalchowk and Lalitpur and other 68 districts contributed 14.8 percent.

Nepal's total revenue including local and national is Rs. 76.81 billion. National revenue occupies Rs 72.28 billion or 94.1 percent whereas 58 District Development Committees collected Rs 1.64 billion or 2.1 percent, 58 municipalities collected Rs. 0.94 billion or 1.2 percent and Rs1.95 billion or 2.5 percent were contributed by 1068 village development committees.

Running Federalism
"Nepal has the potential to developing specific industries compatible with geographical situation and also developing itself into a trade and transit bridge between India and China across the Himalayas. But what that would depend upon is the nature of Sino-India relations," writes S.D. Muni in his article.

For a country which was unable to implement the decentralized local governance for such a long time, how it will implement the federal state remains to be seen.

"The demand for autonomy and federalism is a recent phenomenon in Nepali politics. Although Terai Congress in the 1950s had claimed for Terai Autonomous State, its leaders could not stand on it," writes political scientist Krishna Khanal. "People too have strong belief in democracy. Federalism is not a panacea to all ills. The success of federalism will much depend on the present and successive political leadership. It is expected that entry into federal structure will open chances for new leadership."

Taking Nepal's specific geographic and socio-economic context into consideration, the regions need to be complementary to each other's existence. Hence, the cooperation between the regions and communities is imperative. Federalism based on ethnicity alone would not address the issue of proportionate sharing of power and resources."
Country of Minorities
According to a study, there are 101 ethnic and tribal groups in Nepal. Of the 75 districts of Nepal, Chettrisa re in majority in nine districts, Magar Tharu, Tamang, Newar and Gurung are majority communities in 14 districts. Among the hill caste and ethnic groups, they are in a majority in 28 districts, while the Madhesi communities are in majority in 8 districts.

"Madhesi Pradesh which is heterogeneous in ethnic, demographic and linguistic considerations can hardly form a single unit. The Tharus of western and inner terai and plains don't like to be a part of the single Madhes Pradesh because of their own desire for a separate Tharuwan Pradesh. Similarly, the people of inner Terai-Bhawar where a sizable hill people reside may not also easily agree to form a single Madhes Pradesh," said Dr. Lok Raj Baral in his article Nepal as a Federal State.

Although Madhesi leaders claim that their area is heart land of Nepal's economy, it is not completely true. Its contribution to the national economy is comparatively lower than the hills. However, the overall investment in terai is much higher than in the hills. From irrigation to roads and other projects, terai consumes large amount of development expenditure.

Hill generates resources through remittances, tourism and hydro power and consumption. Even the revenue generated in custom points in terai is consumed by the population of hilly region. For instance, the goods imported to Kathmandu contributes to over 60 percent of revenue generated in Birgunj Custom.

From infrastructures to all other facilities, the government annually spends huge amount of money in terai. Unlike in the past, Kathmandu valley is gradually becoming the major center for foreign trade as most of the import based garment, carpet and pashmina industries are now located in Kathmandu. Before 1990, many industrial hubs which were established in terai region with an intention to export the goods are not in operation now.

But the Madhesi leaders have claimed otherwise. "Madhes is the industrial and agriculture belt of the country. It contributes 72 percent of total GDP but it gets only 12-18 percent of the development budget. The largest trade revenue of the country comes from Madhes," writes Nepali Congress leader Amresh K.Singh in his article restructuring the Nepali State: Madhesi perspective. "Madheshi population want to have its own identity. In past and even today, they are being divided and exploited. Madhesis now want to get united as one major group in the country and ask for their rights to be treated at the same level as others."

The reality of Nepal, however, is that this is the country of minorities and they need to live together harmoniously if they want to survive as prosperous, stable and independent nation.

"Taking Nepal's specific geographic and socio-economic context into consideration, the regions need to be complementary to each other's existence and hence cooperation between the regions and communities is imperative. It can also be called cooperative federalism. Nepal's cultural, ethnic and regional diversities should be taken into account while finding out the rationale of federalism," said Dr. Lok Raj Baral.

The question now is will Nepal sustain the federalism and, more importantly, are the political leaders who hold centralized power willing to devolve their power to the state. Given Nepal's geo-strategic location, the challenge for any system, whether unitary, federal, monarchical or republic, will be how to adjust with the security interests of two big neighbours.

Bolivian Experience
At a time when Nepal is preparing to write a new constitution through elected Constituent Assembly (CA) and debate on federalism has heated up in the country, a tiny land-locked nation of South America is also struggling through the similar process.

A constitutional expert Dr Bipin Adhikari draws parallels from Bolivian experience, which are relevant to Nepal.

"Nepal's advocates of federalism should be able to know why Bolivia which has also drafted a new Constitution through the Constituent Assembly convened in June 2006 has not been able to enforce it right away," said Dr. Adhikari.

"The overwhelming recent vote in favour of autonomy in Bolivia's richest province called Santa Cruz has strengthened the challenge to the reforms being ushered in by the government of President Evo Morales. Exit polls indicate that 85 percent of voters in this eastern province which is mostly inhabited by the European (Spanish) immigrants than indigenous descent backed the autonomy statute in May 4 election, which was declared illegal by the national government and the electoral authorities. The highly polarised South American country is caught up in uncertainty as to what will happen next," Dr Adhikari added.

Bolivia is basically divided between the western highlands, home to the impoverished indigenous majority, and the much wealthier eastern provinces, which account for most of the country's natural gas production, industry, agribusiness and gross domestic product. The autonomy movement is spearheaded by the interests which are not sympathetic to the indigenous people most of whom live in appalling poverty.

Dr Adhikari further pointed out, "The autonomy statute in Santa Cruz and similar referendums planned in other lowland provinces is the question of control and use of natural resources like natural gas, farmland, iron ore, water and forests. This statute would give the province the right to elect its own legislature, create a separate police force, and negotiate its own contracts with foreign oil companies. It would also block the central government's agrarian reform efforts aimed at curbing the heavy concentration of land ownership and distributing idle land to landless indigenous peasants from Santa Cruz and other provinces."

"In fact, the proposal for other categories of autonomy -- regional, indigenous, and municipal -- set forth by the constituent assembly led to a break between the eastern autonomy movements and the national government. The country is losing its strategic and richer provinces very soon because it has not been able to contain their temptation to breakaway due to so many national and international reasons."

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