Nepal’s shift from a centuries-old centralised government system to cooperative federalism has spurred varieties of tensions, particularly in relation to the institutionalisation of intergovernmental relations. Although it is too early to judge the outcome of the federalist constitution Thaneshwar Bhusal (University of Canberra) argues that a range of political, financial and administrative ambiguities are in rise, encouraging potential intergovernmental conflict. Delaying to recognise the root causes of such ambiguities may gradually deteriorate the quality of federal governance in Nepal.

Nepal introduced federalism in 2015 with the aim of addressing three key challenges the country had been suffering for centuries. The foremost was to devolve the political and economic power from Kathmandu-based Hindu/Bramhin/Kshetri-centred centralised system of government. The second was to ensure the balance in development across all types of geographic terrain (mountainous, high-hills and plain lands). And, the third was to increase the participation opportunities of ordinary people at all levels of government so as to end all forms of discriminations that deeply rooted in Nepali societies.

Cooperation, coexistence and coordination

The state’s power is now divided into federal, state and local governments. Article 232 of the constitution exclusively mentions cooperation, coexistence and coordination as key principles upon which the relationship between federal, state and local government level will be maintained. Perhaps to mitigate potential intergovernmental stresses, a range of functions are specified in the constitution to be carried out solely and jointly by all levels of government.

Furthermore, several political institutions such as the Inter-State Council, Intergovernmental Fiscal and Natural Resources Commission, State-Local Governments’ Council and District Coordination Committees are to name but a few examples of political entities to harmonise intergovernmental relationship across federal units of the government.

However, intergovernmental relations – particularly between state governments and the federal government – in Nepal have started to be increasingly contested in such a short span of the introduction of federalism. Although scholars often argue that contestations, stresses and tensions among institutional relationships in federal countries are normal, only less is known about the extent to which Nepal’s cooperative federalism is prone to encourage intergovernmental conflicts.

Political arenas of intergovernmental relations

Article 50 of the constitution specifies that the political objective of the country is to “… maintain relations among federal units on the basis of principles of cooperative federalism … by ensuring local autonomy and decentralisation.” Article 56 further clarifies that there shall be the federation, states and local governments as political entities to exercise sovereign power; and as Article 57 further explains, such power will be exercised in pursuant of the constitution, federal laws and the laws made by the legislative assembly at the state level and municipal assemblies at the local level. These constitutional provisions highlight the fact that although political arenas (or, the federal entities), their power and functions are exclusively mentioned in the constitution, there are indications of centralised federalism. What it means to the intergovernmental relations is that much of the state power – notwithstanding their articulation in the constitution – can only be exercised based on federal laws.

The political aspect of the relationship is notably complex for at least three reasons. First, both state and local governments are equipped with its own legislative, executive and judicial powers. The perceived understanding about this constitutional provision has resulted in the appearance of several contested political issues mostly at the state government level. These include, but not limited to, legislating state laws without the consent of federal parliament, creating public sector organisations, and rejecting public servants of the federal government. In this vein, it is interesting to see that State Number two in the south-eastern Nepal has recently promulgated the State Police Act, which was supposed to include principles, institutions and processes of the yet-to-be promulgated Federal Police Act. Other state governments such as the Gandaki also have initiated to promulgate similar laws.

The idea of federalism as a top-down process

Second, the federal government seems to be having a mindset that Nepal’s federalism is designed as a top-down process. This perspective claims that, although state and local governments have unprecedented scale of autonomy, federal government is the sole authority in determining public policies at all levels of the federation. Many observers believe that such a mindset has created chaotic relationship between state and federal ministries. State governments in particular are experiencing stress in this regard. On the one hand, state ministries are wrestling to counterbalance the power between local governments and the federal government while, on the other, the federal government is increasingly neglecting the policymaking right of state governments.

The informality of intergovernmental relations

The third aspect of the intergovernmental relations is shaped by informality, the expressions and behaviours of influential political leaders both in power and opposition. Often, political leaders from the prime minister to state premiers to mayors express diverse, contested and conflicting views continue to appear in various forms such as informal speeches, personal interviews and microblogs. Although these expressions may not count in specifically shaping or reshaping intergovernmental relations as coded in the constitution, yet their viewpoints stimulate varying opinions amongst political analysts and scholars. There are instances that such informal expressions have deteriorated interpersonal relations between the prime minister and state premiers regardless of the same political party.

Public administration and intergovernmental relations

From the Wilsonian point of view, public administration should have only little role in influencing intergovernmental relations. This is because of a common belief that the institutions and processes of public administration are – in principle – designed to (a) support policymakers (elected parliamentarians and executives) with information and expertise, and (b) implement public policies. However, the pragmatic views of this discipline – as informed in the empirical literature of political science and policy studies – often show blurred insights in countries which were transformed from centralised unitary system of government to federal republics.

The understanding of public administration and federalism is still evolving in Nepal. Public administrators often claim that they have been supporting the political changes incurred almost every decade for the last seven decades or so. It is true that civil servants and teachers joined their hands along with political parties and civil society activists during the political changes in 1990 and 2006, yet only little is understood about ethical, motivational and professional rationales of civil servants.

In some respects, as many politicians repeatedly claim, public administrators in Nepal have been appearing against the regime with the hope that the newcomer governments will be beneficial to their career. For example, civil servants – represented by trade unions – obliged political parties in 2008 to amend the civil service act by ensuring ‘automatic promotion’ as a reward of participating in the 19-days protest that, backed up by Maoist insurgency, overthrew centuries-long monarchy from Nepal. However, trade union leaders keep on claiming that their participation against the regime should not be understood as a political activity, which the prevailing civil service act does not allow. Instead, those who participate in protests against government argue that a sense of citizenship urges them to wake up.

These testimonies show strong reflections about varying albeit contested roles of public administration in Nepal’s political management. Nevertheless, civil servants have historically demonstrated their expertise, dedication and loyalty to manage intergovernmental relations in many difficult times. For instance, when the country plunged into civil war between 1996 and 2006, civil servants were putting their lives on their palm to work in most dangerous remote areas to provide basic governmental services to ordinary people. Several talented and expert bureaucrats were killed in the war. Their contribution had significantly maintained the presence of state (central government) at the local level. Similarly, when the government failed to conduct local elections from 2002 to 2016, civil servants were deployed in all rural and urban municipalities to work as de facto mayors and councillors. All the local governments, notwithstanding their political architecture, were led by appointed officials for over a decade.

Public administration reform

Two aspects of public administration reform in recent times showcase important insights into this debate. The foremost is the hardware, i.e. the process of transforming the infrastructure of public administration from traditionally formed unitary structure to newly created federal governance. The government has taken actions to dissolve many ministries and departments at the federal level in order to devolve the roles and duties of such ministries at the state level. The second aspect of transformation is about the changes in software, i.e. reforms that aimed at transforming the roles, responsibilities and accountability of bureaucrats. Of the 110,000 permanent employees, about 80,000 personnel were recruited by the Public Service Commission (PSC) in accordance with the principle of meritocracy. These officials were supposed to work for the then-central government, which means that their accountability would remain with the (now) federal government. However, as the federal government has only a few functions to carry out in the new governance landscape, approximately 45,000 officials will be required at the federal level. Although the reintegration process of civil servants into federal, provincial and local government has already taken a good speed, questions related to the career and accountability are specifically contested as majority of the bureaucrats are unwilling to be shifted to lower echelons in the administrative structure.

The financial spectrum of intergovernmental relations

The financial aspect of the federalism is relatively more crucial than other when it comes to defining, maintaining and sustaining intergovernmental relations. There are three obvious reasons for this argument. The first is the extent to which local and provincial governments are equipped with taxation rights. Each level of government is allowed to impose taxes on the policy areas listed in Schedules 5, 6, 7, 8 and 9 on the constitution. Furthermore, the constitution requires all the three levels of government to establish federal (Part 10), provincial (Part 16) and local (Part 19) consolidated funds. Each level of government is obliged to put money into these consolidated funds to be spent only in the consent of the relevant federal, provincial and local legislative assembly.

The second aspect is the question of revenue sharing responsibilities among the levels of government. Obviously, not all provinces and local governments are equally capable in generating internal revenue hence, as the constitution envisions, the federal government needs to play several roles to, inter alia, balance the financial strength of subnational governments. Article 250 forms a high-level national resource and fiscal commission with the aim of “… determine extensive grounds and measures regarding the distribution of revenue from the federal consolidated fund to the federal, provincial and local governments, and make recommendations on the distribution of equalisation grants to provincial and local governments (Article 251).”

In accordance with this constitutional provision, three different fiscal transfer categories are adopted in the financial spectrum of intergovernmental relations. The first is the general-purpose transfer which aims to transfer unconditional grants to subnational governments. These include block grants (for health, education etc.) and discretionary grants (to be decided by local councils). The second is the specific-purpose transfer which aims to distribute grants for achieving certain policy objectives. This scheme also has two major types: matching grant (the recipient government must contribute certain percentage of investment to be matched) and non-matching (no matching is needed but the grant is still conditional). The third and perhaps the most important grant is performance-based grant in which local governments are distributed grants based on results. Despite these impressive provisions of financial management, there are transcending ambiguities in some aspects of imposing, collecting, distributing and spending revenues across federal units.

How far the intergovernmental relations complex?

The nature of intergovernmental relations is itself a complex phenomenon. As David Cameron puts forward, there are at least six different factors that work in a complex environment of government to shape the relationship amongst federal units: demographic and geographical; social and cultural; historical; constitutional and institutional; political; and circumstantial. From the discussions above, the Nepali federalism seems to be encountering with all of these factors in a way that every single factor needs to be redefined in the changing political context. Definitions certainly impact the interpretations and hence practices are affected.

From political perspectives, formal mechanisms of federal units are adequate for the time being although timely reforms will always be in need. Moreover, continuous dialogues between state governments and the federal government will be required to minimise the complexity associated with intergovernmental relations. In terms of administrative apparatus, the challenges are to dismantle centralised structures and create new institutions at the state and local government level. This is not an easy task since many of the centralised organisations were established in the early years of last century, many of which now require to be established under local governments. However, the government seems to be gradually taking actions in moving forward with the creation of basic infrastructure of public administration. Another challenge is to harmonise the public personnel management system so as to distribute the existing human resource across all levels of governments. This requires the government to be ruthless because almost all the 80,000 centrally appointed bureaucrats are unwilling to go down to subnational entities with the fear that their career and professionalism will be compromised. In fact, this aspect of intergovernmental relations is heavily criticised by state premiers on several occasions. Nevertheless, the ongoing personnel reintegration process can be seen as a step forward towards addressing this challenge. In terms of fiscal management, complexities are mainly around imposing and collecting taxes. There are certain policy areas in which ordinary people are taxed for more than once. Only a clear legislative framework can solve these problems.

To conclude, intergovernmental relations in federal settings are relatively complex but can be harmonised gradually by adopting effective policy, organisational and procedural measures. The Nepali experience of perceived complexities in institutionalising federalism offers some aspects of political, administrative and fiscal conflicts among federal entities but are not serious until now. However, considering the principle of federalism i.e. cooperative, there requires clarification about the extent to which each level of government in Nepal is committed to strengthen vertical cooperation and horizontal coordination amongst political units.

This article gives the views of the author, and not the position of the South Asia @ LSE blog, nor of the London School of Economics. Please read our comments policy before posting.

Thaneshwar Bhusal has a PhD from the Institute for Governance and Policy Analysis (IGPA), University of Canberra, Australia. He holds an honorary position as a professional associate at IGPA. He also works as a bureaucrat in the Nepalese civil service. Thaneshwar is interested in citizen participation, intergovernmental relations and political and administrative reforms in developing countries. He tweets @tsbhusal.


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