1.

Understanding Federalism: Definitions and Meanings

1.1. Definition of Terminologies
From around 200 countries in the world approximately 28 are federal. It also constitutes 40% of the
world‘s population. Recently, the interest of states has been increased to adopt federal structure by
looking its tremendous potential in accommodating diversity. Etymologically, the word federal is
derived from the Latin word fedus to mean that covenant or treaty. It implies partnership based on
consent or agreement of the people. As such it connotes a solemn agreement among smaller polities
to form a larger perpetual entity. It is a mode of forming a polity on the basis of reflection and choice.
According to the prominent scholar Daniel Elazar, Federalism is a design to achieve some degree of
political integration based on a combination of self-rule and shared rule. It refers to the advocacy of
multi-tiered government combining elements of shared rule and regional self-rule.

Ronald Watts also defined federalism as the advocacy of multi-tiered government combining
elements of shared rule/collaboration partnership/ through common government and regional self-
rule/constituent unit autonomy/ for the government of constituent units. According to John Kinciad,
federalism is defined as ―a union of separate states in which power is divided and shared between
strong union government and strong state governments‖. It is a non-centralized mode of organizing
government. Therefore, federalism is a form of political ideology which composed of two or more
tiers of governments which permit constituent units to enjoy self-rule and at the same time participate
in the joint rule of the larger entity. It is based on the value and validity of combining unity and
diversity: accommodating, preserving and promoting distinct identities with in a larger political
union.

The World’s Federations

Argentina, Australia, Austria, Belau, Belgium, Bosnia- Herzegovina, Brazil, Canada,
Comoros, Democratic Republic of Congo*, Ethiopia, Germany, India, Iraq*, Malaysia,
Mexico, Micronesia, Nigeria, Pakistan, Russia, St. Kitts and Nevis, South Africa, Spain,
Sudan*, Switzerland, United Arab Emirates, United States of America, Venezuela
*Post-conflict societies whose federal constitutions are not consolidated

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 1.2.The Spectrum of Federal Political System
There has been much scholarly debate about the definition of federalism. Academically speaking the
clarification of the differences among the three terms: ―federalism,‖ ―federal political systems,‖ and
―federations is paramount important. In this distinction, ―federalism‖ is used basically not as a
descriptive but as a normative term and refers to the advocacy of multi-tiered government combining
elements of shared-rule and regional self-rule. It is based on the presumed value and validity of
combining unity and diversity. The essence of federalism as a normative principle is the value of
perpetuating both union and non-centralization at the same time. ―Federal political systems‖ and
―federations‖ are used as descriptive terms applying to particular forms of political organization. The
term ―federal political systems‖ refers to a broad category of political systems in which, by contrast to
the single central source of political and legal authority in unitary systems, there are two (or more)
levels of government thus combining elements of shared-rule (collaborative partnership) through a
common government and regional self-rule (constituent unit autonomy) for the governments of the
constituent units. This broad genus encompasses a whole spectrum of more specific non-unitary
forms, i.e., species ranging from ―quasi-federations‖ and ―federations‖ to ―confederacies‖ and
beyond. These spectrums are listed bellow as they defined by Elazar;
Unions: Polities compounded in such a way that the constituent units preserve their respective
integrities primarily or exclusively through the common organs of the general government rather than
through dual government structures. New Zealand and Lebanon are examples. Belgium prior to
becoming a federation in 1993 was an example.
Constitutionally: Basically unitary in form, in the sense that ultimate authority rests with the central
government but incorporate constitutionally protected sub-national units of government that have
functional autonomy.
Federations: Compound polities, combining strong constituent units and a strong general
government, each possessing powers delegated to it by the people through a constitution, and each
empowered to deal directly with the citizens in the exercise of its legislative, administrative and
taxing powers, and each with major institutions directly elected by the citizens.
Confederations: These occur where several pre-existing polities join together to form a common
government for certain limited purposes (for foreign affairs, defence or economic purposes), but the
common government is dependent upon the will of the constituent governments, being composed of
delegates from the constituent governments, and therefore having only an indirect electoral and fiscal
base. Historical examples include Switzerland 1291–1798 and 1815–47, and the United States 1781–
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89. In the contemporary world, the European Union is primarily a confederation, although it has
increasingly incorporated some features of a federation.
Federacies This term, coined by Elazar (1987) refers to political arrangements where a smaller unit
or units are linked to a larger polity, but the smaller unit or units retain considerable autonomy, have a
minimum role in the government of the larger one, and the relationship can be dissolved only by
mutual agreement. Examples are the relationship of Puerto Rico and the Northern Marianas to the
United States.
Associated states: These relationships are similar to federacies, but they can be dissolved by either of
the units acting alone on prearranged terms established in the constituting document or a treaty. The
relationship between New Zealand and the Cook Islands and Niue are examples. Furthermore, other
political systems outside the general category of federal systems may incorporate some federal
arrangements because political leaders and nation-builders are less bound by considerations of
theoretical purity than by the pragmatic search for workable political arrangements. Such
considerations may also lead to hybrids such as the European Union which, although originally a
purely confederal arrangement, has in recent years incorporated some features of a federation.
Condominium’s: Political units that function under the joint rule of two or more external states in
such a way that the inhabitants have substantial internal self-rule. Examples have been Andorra,
which functioned under the joint rule of France and Spain 1278–1993, Vanuatu, which operated
under a British-French condominium 1906–80, and Nauru which was under a joint Australia–New
Zealand–United Kingdom condominium 1947–68.
Leagues: Linkages of politically independent polities for specific purposes that function through a
common secretariat, rather than a government, and from which members may unilaterally withdraw.
Hybrids: Some political entities combine characteristics of different kinds of political systems.
Those which are predominantly federations in their constitutions and operation but which have some
overriding federal government powers more typical of a unitary system may be described
as ―quasi-federations.‖ Examples are Canada initially in 1867, which was basically a federation but
contained some unitary elements which fell into disuse in the second half of the twentieth century.
India, Pakistan and Malaysia are predominantly federations, but their constitutions include some
overriding central emergency powers.

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 1.3.Evolution of Federations and Federalism Since the Late 18 th C

The history of federalism felled under two categories: from USA constitution and from ancient times.
While the United States, which adopted a federal constitution in 1787, is often regarded as the first
modern federation, the history of federalism is much older. The first documented federal system came
into being among the ancient Israelite tribes over 3200 years ago. Of similar antiquity were the
confederations of the Bedouin tribes and the Native confederacies in North America. The early
leagues of the Hellenic city-states in what is today Greece and Asia Minor were designed to aggregate
communal democracies to foster trade and secure defense.

The Roman Republic established asymmetrical arrangements whereby Rome became the federate
power and weaker cities were attached to it as federal partners. The medieval period saw self-
governing cities in what is now northern Italy and Germany, and cantons in Switzerland linking in
loose confederations for trade and defense purposes. The Swiss confederation established in 1291
lasted despite some disruptions until 1798 and was renewed 1815–47. In the late sixteenth century an
independent confederation, the United Provinces of the Netherlands, was established during a revolt
against Spain. Both the Swiss and Netherlands confederations were affected by the Reformation,
which sharpened internal divisions. This period also saw the first writing on explicitly federal theory,
exemplified by the Politica Methodice Digesta of Althusius and subsequently by the efforts of
German theorists to provide grounding for a restored and modernized Holy Roman Empire. Several
of the British settlements in North America, particularly in New England, were based on federal
arrangements growing out of Reformed Protestantism.

However, Federations have been formed in a series of historical waves over the last two
centuries. The first wave, from the late eighteenth to the early twentieth centuries, saw the creation
of new countries with formerly independent units coming together in a federal form.
Switzerland and the United States initially came together as confederations: the American experiment
with confederation lasted for only eight years, from 1781 to 1789, when the 13 states addressed a
weakness at the centre by forming the first modern federation; the Swiss confederation evolved over
more than five centuries, but after a brief civil war it adopted, in 1848, a federal constitution modeled
on the American example. Germany‘s first federal constitution emerged in 1871 as a successor to
loose confederal arrangements. While Canada was initially formed in 1867 out of the coming together
of three colonies in British North America (and in due course expanded by the addition of others), its

4
federal bargain included splitting the largest of these into two provinces—so its origins were both in
coming together and devolution. The six colonies in Australia came together as a federation in 1901.
In Latin America, four federations emerged in the nineteenth and early twentieth centuries. They all
won independence following Napoleon‘s conquest of Spain, but then had checkered constitutional
histories with periods of dictatorship and civil unrest. Their federal constitutions emerged over time,
sometimes after earlier experiments with both federal and unitary regimes. In the last 20 years, the
transition to genuine democracy in Argentina, Brazil and Mexico has brought real life to their federal
constitutional arrangements.

The post-war break-up of the European empires saw the creation of various post-colonial
federations, as well as some failed attempts. India, Pakistan, Malaysia, and Nigeria have endured as
federal systems. The efforts by the departing colonial powers to bring together formerly separate
colonies into new federal countries were not a success in the West Indies, Central Africa, French
West Africa, and East Africa, nor were attempts to introduce federal arrangements in Indonesia, Mali,
and Uganda. The very small federations of Belau, Comoros, Micronesia, and St. Kitts and Nevis did
emerge from decolonization.

The next significant wave came with new federations emerging from the collapse of communism.
The communist Soviet Union, Czechoslovakia, and Yugoslavia all had nominally federal
constitutions, but were in reality centrally controlled one-party regimes. However, their federal
structures took on real political significance. With little experience of democracy and the tremendous
stresses of transition, all these federations failed. However, Russia, which itself had been a federation
within the old structures of the Soviet Union, did emerge as a post-communist federation. And
Bosnia-Herzegovina emerged out of Yugoslavia with a federal structure.

About the same time, new federations were emerging from unitary states. Belgium is the clearest
example, formally adopting a federal constitution in 1993. As Spain democratized after Franco, it
devolved significant powers to its autonomous regions and became effectively federal. South Africa
also adopted an essentially federal structure (along German lines), when it democratized after the end
of apartheid. Other countries—Italy, Indonesia, Peru, UK—moved towards substantial devolution to
regional governments, but they are not yet fully federal. Both Bolivia and the Philippines have
debated adopting federalism.

5
The most difficult cases have been the new federations emerging from post-conflict situations.
Under the Dayton Accord, Bosnia-Herzegovina was established as a federal regime; however, it has
remained under a kind of international supervision. Ethiopia, which had never been democratic,
adopted federalism after rebels defeated the Mengistu regime, as did Sudan as part of a
comprehensive peace accord that ended its long civil war with the South. The Congo‘s new
constitution, under which it recently conducted the first nation-wide elections, is effectively federal.
Iraq‘s voters ratified a federal constitution in 2005, but its implementation is proving to be very
challenging. All of these situations remain difficult. In other cases, such as Sri Lanka and Cyprus,
efforts to find a federal formula to end conflict and division have failed so far. Nepal is currently
looking at the possibility of federalism, following the end of its civil war.

The last case that should be mentioned in the history of federalism is the European Union. The EU is
a unique political institution, perhaps more confederal than federal, but it has a number of federal
features, and there is a continuing debate amongst Europeans about whether to move more fully in a
federal direction. In any case, the EU experiment remains highly relevant for students of federalism.
1.4. Some Common Features among Federations
Generally, the common structural characteristics of federations as a specific form of political system
are the following:

a. At least two orders of government, one for the whole federation and the other for the regional
units, each acting directly on its citizens; the regions have many names: we shall refer to them as the
‗constituent units‘ of the federation. Examples of the Names of Constituent Units. The most
common names of constituent units are states (Australia, Brazil, Ethiopia, India, Malaysia,
Mexico, Nigeria, and the US) and provinces (Argentina, Canada, Pakistan, South Africa). But
other terms are Länder (Austria and Germany) and cantons (Switzerland). There are both regions
and communities in Belgium and autonomous communities in Spain. Russia has regions, republics,
autonomous areas, territories, and cities of federal significance. Some small federations have islands.
b. A formal constitutional distribution of legislative and executive authority and allocation of
revenue resources between the two orders of government ensuring some areas of genuine autonomy
for each order;
c. Provision for the designated representation of distinct regional views within the federal policy-
making institutions, usually provided by the particular form of the federal second chamber;

6
d. A supreme written constitution not unilaterally amendable and requiring the consent for
amendments of a significant proportion of the constituent units;
e. An umpire (in the form of courts, or an upper house with special powers); and
f. Processes and institutions to facilitate intergovernmental collaboration for those areas where
governmental responsibilities are shared or inevitably overlap-IGR.
Not all of the 28 countries listed above are fully meet all the criteria for federalism. Some are very
centralized and weakly federal. Others have special unitary features that may sometimes permit the
central government to override the autonomy of constituent units. Does this mean they are not
federal? There is no definitive answer. As a practical matter, the issue is whether the country
normally operates in a federal manner; i.e., that there is some genuine, constitutionally based
autonomy at both levels.
2. Origin and Formation of Federations
2.1. Models of Federalism
Federations have arisen in very different circumstances, each being the unique result of choices by
political leaders and larger historical forces. Federalism has been chosen to bring together formerly
separate units into a new country, or to rearrange a previously unitary country, and even as a product
of both processes together. Federations have emerged within these larger processes of country
formation and evolution in a variety of ways:
a. Coming Together/Aggregation/
In some cases, coming together was central to the emergence of a new, federal country. Previously
separate units—independent states or colonies—concluded that they had enough common interest and
shared identity to join together in a federal arrangement. Why federal? because a federal structure
permitted each unit to preserve some of its autonomy while pooling other aspects in the new
community. Eg. USA, Switzerland
b. Holding Together/Devolution
In other cases, the country may have originally been created with a unitary and highly centralized
(often authoritarian and undemocratic) structure. The eventual choice of federalism was in response
to democratic political pressures for devolution because of the country‘s multiple languages,
religions or ethnicities, and, perhaps, major economic differences between regions. In some countries,
the regions pressing for autonomy may have been distinct political entities in the past. Eg. Belgium,
India, Ethiopia?
c. Both
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In yet other cases, these two processes combined. Canada emerged from the creation of Ontario and
Quebec out of a previously unitary regime and from the addition of new provinces.
2.2. Symmetric Vs Asymmetric in Federation
The constitutional division of legislative, executive or judicial powers to each order of
government varies from country to country according to the specific circumstances and
interests involved. Each federal system may also exhibit different approaches in the
allocation of power between the constituent units. The variations may, however, affect the
operation of the system in a particular country. The allocation of power, the variations therein
and the relationships between the regions will lead us to the study of the asymmetry and
symmetry of federations. The concept of the symmetry of a federation is defined as follow:

An ideal symmetrical federal system would be one composed of political units comprised of
equal territory and population, similar economic factors, climatic conditions, cultural
patterns, social groupings, and political institutions ... In it no social, economic or political
peculiarities would exist which might demand special forms of representation or protection.
The basic justification for having a federal constitutional arrangement rather than a unitary
one would be found in the completeness and integral character of the various political
subsystems.

On the other hand, asymmetries in federations as opposed to the symmetries of federations

defined as the federal system that would be possessed of political units corresponding to
differences of interest, character, and make up that exist within the whole society. In it the
diversities in the larger society find political expression through local government possessed
of varying degrees of autonomy and power ... In the model asymmetrical federal system each
component unit would have about it a unique set of features. The definitions provided above
address the entire social, economic and political conditions for the asymmetry/symmetry of
units in a federation.

This approach gives all federal systems an asymmetrical character despite the fact that power
may be symmetrically distributed to the constituent units. This is because it is less likely for
the units to similarly manifest the factors stated above. A federal system can be designed
asymmetrically in order to address several issues such as historical inequalities or other
factors, different bargaining powers of the constituting units, or geographical differences

8
depending on its impact on the development of a federal system. In order to address any of
these reasons in a federation, a special status can be accorded to a state.

Ronald Watts deals with the issue of symmetries and asymmetries in a federation, but
emphasizes on the study of the latter. He classifies asymmetries in two forms: political and
constitutional asymmetries. According to Watts political asymmetry exists in every federation
and arises from the impact of cultural, economic, social and political conditions affecting the
relative power, influence, and relations of different regional units with each other and with the
federal government. These factors lead to variations among regions with respect to their
population, territorial size, economic characteristics, resources and wealth.

Constitutional asymmetry, on the other hand, refers to differences in the status of legislative,
executive and financial resources powers assigned by the constitution to the different
regional units. It implies that if all the constituent units of a federation have the same
jurisdiction over legislative and executive powers, as well as the utilization of financial
resources, the distribution of power is constitutionally symmetrical. If a federation is
comprised of fully-fledged regional governments and different units such as federal districts
or federally administered units, an asymmetrical relationship with the federal government
will exist. The difference in status between the states and other units presupposes some kind
of asymmetry in the legislative, executive or financial power between them. If we restrict
ourselves to only the asymmetry of power between fully-fledged states, we can observe an
explicitly provided constitutional asymmetry between the states. In doing so, the drafters of a
constitution may follow either of the following approaches. First, it provides a constitutional
provision which restricts certain functions under specified conditions and reserves them for
the federal government. The second approach is to provide certain matters which fall under
the jurisdiction of the federal and regional governments, but also to provide for a particular
member state to increase its power and functions. In this category, we can find, for example,
India and Canada. In India Jammu and Kashmir, and in Canada, Quebec, have some 'powers
which are not assigned to the other states. The third approach is simply to provide a
provision that permits all governments, regional as well as federal, to delegate their power to
another. In this approach there is no specific mention of power and functions being
asymmetrically assigned to a particular member state.

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 2.3. Models of Operating Federal System: Cooperative vs Dual Federalism

A) Dual Federalism
In such systems, the allocation of executive authority is co-extensive with the distribution of
legislative responsibilities. This is because, if federal and state governments are to remain
autonomous each must enforce the laws made by their legislature. Therefore, not only legislative but
also executive, financial and judicial power should be divided between them to ensure their
autonomy. If strictly applied this results in a dual polity assuming little sharing /overlap of power
between the two levels of governments.

The US federal system is best example of dual federalism, where the federal government has its own
extensive state structure to enforce its own laws and the same is true for the regions (states). The two
governments are sovereign within their respective spheres. Executive duality has some advantages
that includes; Re-enforces the authority of the legislative body, it assures to the federal government
the authority to implements and enforces its own legislation (may not be effective when implemented
by regional authorities), Coincidence between executive and legislative power enables the law
making body to control the body executing the laws. However, this does not necessarily mean that,
there is total lack of link between the two levels of governments.
B) Executive/cooperative Federalism
In such type of federations, legislative authority may not necessarily coincide with administrative
responsibility. Administration of federal legislations is usually constitutionally assigned to regional
/state governments

Germany: In the federal system of Germany, states are authorized to execute federal legislations in
their own rights so long as it is not specified by the federal government. Except to those areas
specified under the direct federal administration, the entire administrative agencies are found in
regions. Therefore, the regions establish their own administrative authorities and procedures in
executing federal laws. However, the federal government exercises an oversight to ensure the
execution of federal laws properly by the regions. In some instances, the federal constitution
mandates regions directly to implement federal laws. However, it also provided that, if necessary the
federal government may reserve some executive power to be executed directly by itself. In some
cases the federal government make laws and directly executes the laws through its own agencies E.g.

10
customs, railways, postal services etc….. To this extent dual polity exists but these areas are very
limited in scope and as a result most federal laws are executed by states.
2.4. Why Federation: Advantages and Disadvantages of federalism
There are contending arguments about federalism. While some suggest that in multicultural societies
federalism simply reinforces tension among the different groups, others insist that only federalism
with its scheme of self-rule and shared rule and giving room for multiple identities to co-exist
accommodates the groups thereby reducing tension.
Advantages:
i. Lessoning of Despotism: it disperses power territorially hence there is no concentration of
power that leads to tyranny.
ii. Responsiveness to local needs: it brought the government closer to the people
iii. It encourages innovation, experimentation and inventiveness: it offers the potential for
trying new ideas and ways of doing things at various levels thereby experience sharing allows
the country to learn from lessons.
iv. It has a potential to reconcile the forces of centralization and fragmentation through
accommodation of diversity; through constitutional and institutional mechanisms.
v. It provides multilevel opportunity to solve problems
vi. Reduce space, and overcome tension come due to diversity
Disadvantages:
i. Complexity: especially in the eyes of the common people
ii. Overlap of powers and activities: branches of governments are every where
iii. Conflict of jurisdiction
iv. Costly and time consuming
v. Potential to local tyranny: because there is constituent state sovereignty and the principle
of non-interference. As a result, sometimes states are converted to islands of illiberalism
and began to oppress minorities inside the region
3. Formation of Federation: Variety of Factors and Processes
What factors and processes have led to the adoption or creation of federations? Some analysts have
tried to identify a single common factor. For instance, W.H Riker attributed a significant external
or internal threat as the factor common to the creation of all federations. But while this factor has
been important in a number of cases, notably Switzerland, Canada and Mexico, there are a number
of other instances, such as Australia, where it was clearly not the major factor. Indeed, in most
11
federations it has been a combination of factors that was responsible for the choice by political
leaders of federation as a form of government and the process of formation has varied from
federation to federation. The major factors are the following;
3.1. The Balance of Pressures
While the particular factors encouraging unity and regional autonomy have varied in the formation
of federations, what is common to all the successful instances is the existence of a relative balance
in the pressures for political integration and for regional autonomy. It should be noted that it is
possible for a strong integrative consciousness in a wider community to coexist with an equally
strong regional consciousness, as has been the case in India for instance, or for both forces to be
relatively weak, as was the case in the founding of the Australian federation; but what both these
cases had in common was the relative balance in the forces for unity and for regional autonomy.
Where one of these pressures is strong and the other weak, the result is likely to be either unitary
political integration, on the one hand, or the independence of the regional units or at least a con-
federal solution, on the other.

Where both motivations exist in something approaching an equal balance, federation as a solution
is likely to appeal by enabling both an effective federal government and genuine regional
autonomy to coexist. This latter situation arises because people may be members of and feel loyalty
to several groups and communities at the same time (e.g., family, work group, professional
association, church, ethnic or linguistic community, political movement, village or city, regional
community, nation, supranational association or global community) rather than being focused on
only one of them to the exclusion of the others. Because people‗s attachments to these different
groups or communities vary in intensity and over time, these loyalties are not necessarily mutually
exclusive; hence, the possibility of the coexistence of both uniting and regionalizing pressures at
the same time.

3.2. Differing Processes in the Creation of Federations

A number of analysts have noted that federations have been created in different ways. Carl
Friedrich in 1968 drew attention to the importance of the process by which federations were
created and to the fact that while some were established by bringing separate units together, others
involved devolving power to regional units. More recently, Alfred Stepan has emphasized the
distinction between federations created by the ―coming together of formerly separate units and
those resulting from holding together regions in a formerly united polity.
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Federations have, in fact, been created in three different ways. One is the aggregation of formerly
separate units. The United States, Switzerland, and Australia provide classic examples. In these the
process of aggregation led in the early stages to an emphasis on retaining a large element of
autonomy for the federating units. A second pattern has been through devolution from a previous
unitary regime. Examples of this pattern are provided by Belgium, Germany (after the Third
Reich), Nigeria and Spain. This pattern, at least initially, has usually resulted in a greater relative
emphasis on federal powers. A third pattern has been the combination of these two processes,
Canada and India providing major examples. The creation of the Canadian federation involved a
devolution to two new provinces (Ontario and Quebec) from what had previously been a single
unitary Province of Canada, and also the addition of two previously separate colonies (New
Brunswick and Nova Scotia) as provinces of the new federation. The Union of India established by
the 1950 constitution included devolution to states that had previously been provinces and the
incorporation of the previously separate princely states into the new federation.

3.3. Catalysts of Political Integration

One set of factors found in the formation of federations has been those contributing to political
integration. While the specific factors contributing to the motivation for distinct regional groups to
come together or when devolution occurs to maintain common institutions of shared-rule has
varied from federation to federation, the existence of some desire for shared-rule has been common
to all of them. The pressure for united action in at least some areas has depended on the following
factors;

The first is the influence of the background conditions, including (a) the degree of spillover from
pre-existing national, economic and social links or integration among the constituent units, (b) the
geographical proximity of the constituent units, (c) the relative size and bargaining power of the
constituent units, and (d) the affinities between their elites. Second is the strength of the integrative
motives present, including (a) the desire for security from external or internal threats, (b) the desire
for economic benefits from the larger market or complementary products, (c) the desire for greater
international influence, and (d) the desire for a common identity. Third is the character of the
integration process itself in terms of (a) the character of the bargaining process, (b) the role of
political leaders, (c) the role of external governments or, in the case of colonial federations, the
imperial government, and (d) the timing and sequence of steps in the process of negotiation and
unification.
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 3.4. Catalysts of Constituent Unit Autonomy
The strongest catalyst for political union into larger federations since the middle of the twentieth
century has been increasing worldwide interdependence in an era when advances in technology and
communications have made it difficult for even nation-states to be self-sufficient economically or
to defend their own security. Paradoxically, it has been the awareness of this trend that has also
frequently encouraged a stronger regional consciousness within political systems. The growth of
larger and remote political structures, coupled with the increasing pervasiveness of vast
governmental structures and bureaucracies impinging upon the life of citizens, has often provoked
a counter-reaction. The heightened resistance to political integration and the vigorous demand for
self-expression, dignity and self-rule have been particularly strong where regional groups have
been marked by differences of language, race, religion, social structure, and cultural tradition. In
such cases as Switzerland, Canada, India, Pakistan, Malaysia, Nigeria, Ethiopia, Belgium and
Spain, linguistic, religious or racial minorities, fearing discrimination at the hands of political
majorities, have insisted on regional autonomy as a way to preserve their distinct identities. Where
the threat to this distinctiveness has been perceived as particularly serious, such regional groups
have sometimes turned to outright secession as the only sure defense against assimilation.

Linguistic identity has been a particularly potent force for regionalism. This is not surprising,
since language differences often serve as barriers to communication. Moreover, a shared language
provides a means of expression and communion, which is a most important ingredient in one‗s
awareness of a social identity and a treasured heritage of a common past. Not surprisingly, any
community governed through a language other than its own has usually felt disenfranchised.
Significantly, linguistic regionalism has been a greater problem in societies that are industrial or are
in the process of modernization compared with primitive agrarian societies, because in the former,
official recognition of a language substantially affects career opportunities and employment. Where
different linguistic groups exist within a country, it would appear that conflict is particularly severe
where members of different language groups are under unequal pressures to learn the language of
others.

Other cultural factors can also be divisive. In Switzerland, for example, political divisions have as
often followed confessional as linguistic lines. Elsewhere, as on the Indian sub-continent,
ostensibly religious differences have been explosive. Generally, regional consciousness has been
strongest where differences of language, race, religion and social institutions have reinforced rather
14
than cut across each other, as in Switzerland, or where they have been associated with economic
subordination, as in Belgium and Malaysia. Among other factors contributing to the intensity of
regional consciousness are differences in the degree of modernization. Where some regions have
lagged behind, this has been a source not only of resentment but also of fears of exploitation or
domination by the more advanced regions.

Differences of economic interest have also been an important factor. While economic differences
have often contributed to integration through opening the possibility of exchange of different
products across regional boundaries, they may also foster regional consciousness because of
differences in problems of production, types of exports, sources of foreign capital and appropriate
policies for the promotion of economic development. Furthermore, although political union may
bring economic gains to the union as a whole, economic integration may not only have trade-
creation effects but may also have ―trade diversion effects that impose hardship and inequality on
some regions. It is noteworthy that many ostensibly linguistic, racial or cultural movements for
regional autonomy or separateness in countries such as Canada, India, Malaysia and Nigeria have
had strong economic undercurrents related to the struggle for jobs and economic opportunities.

In federations such as the United States, Australia, Brazil and Argentina, where linguistic or
cultural divisions have been more moderate, economic and also historical differences among the
federating units have been sufficiently strong to fuel the pressure for regional autonomy. Not to be
overlooked is the impact in some cases of direct or indirect external influences upon regional
consciousness. Quebec in Canada, Biafra in Nigeria and the Jura in Switzerland provide powerful
examples of the impact of direct encouragement of a regional separatist movement by a foreign
government.

This discussion suggests that to understand regionalism it must be examined not simply in terms of
the absence of factors encouraging political union, but also in terms of factors that encourage a
regional consciousness. These factors parallel the factors for united action identified above, but
encourage regional consciousness. First, there are the background conditions, including (a) the
degree to which each particular region is internally homogenous in language, religion, race and
culture, (b) differences in the level of modernization, economic development and political ideology
or outlook, (c) the degree of disparity in relative wealth and potential influence among constituent
units within the proposed federation, and (d) the competitiveness of the elites in the different
regimes. Second, the strength of the immediate motives for regional autonomy is significant,
15
including (a) the desire to secure the distinctive features of the regional society against potential
threats of assimilation, (b) the desire to enhance the economic benefits for the specific regional
group, and (c) the strength of the desire for a sense of regional identity or even nationhood. Third,
also important is the character of the process for negotiating a federal solution involving regional
autonomy in terms of (a) the character of the negotiating process (e.g., use of referendums,
elections, or guerrilla campaigns), (b) the role of leading regional elites, (c) the responses of
neighboring regions, (d) the impact of direct and indirect external influences, and (e) the timing and
sequence of steps in the negotiations.
3.5. The Capacity for Federal Government
K.C. Wheare, in examining factors leading to the creation of federations, drew attention to an
important difference between the factors that contributed to the desire for federation and those that
contributed to the capacity to create and operate a federal form of government. The desire for
federation is itself an important element in the capacity to operate a federal system. There must be a
strong enough sense of joint identity and interest to achieve loyalty to a common federal
government for certain purposes and to make the necessary accommodations to achieve this. There
must also be a strong enough sense of distinct identities to maintain real autonomy at the regional
level.

A number of other factors are also important for the capacity to operate a federal system. Among
these are the availability of sufficient trained human and financial resources to support the
operation of two or more orders of government. Another crucial element is the existence of a
supportive political culture. Since federations are distinguished by each order of government
receiving its authority from the constitution, a respect for constitutionalism and the rule of law is a
crucial prerequisite for effective operation. Since federations involve accommodating and
reconciling territorial diversity, a political culture emphasizing tolerance and compromise is an
equally important prerequisite. These prerequisites mean that the existence of reasonably
functioning democratic processes are an important factor. The failure of such nominal federations
as the former Soviet Union, Yugoslavia and Czechoslovakia and the ineffective operation of the
new constitutions of Sudan and Iraq are point to these prerequisites.

16
 3.6. The Influence of Models
Earlier federations have often served as models providing institutional precedents and examples
that have been of influence to political leaders establishing subsequent federations. This influence
has taken both positive and negative forms where particular institutional arrangements have been
followed or avoided in the light of previous experience. The United States of America as the first
modern federation, established in 1789, not only influenced a number of features adopted by the
Swiss in 1848, such as the bicameral legislature (but the avoidance of a non-collegial presidency),
and the Australian federation in terms of the form of the distribution of powers, but it also was the
predominant model followed by the Latin American federations, which all adopted the presidential-
congressional form of institutions.

On the other hand, in the 1860s during the period of the civil war in the United States, Canadians
deliberately chose a more centralized form of federation to avoid the apparent weakness of the U.S.
federal government. Canada, founded as a federation in 1867, was the first federation to
incorporate Westminster parliamentary institutions, and this pattern was followed in most of the
former British colonies that subsequently became federations. Australian political leaders, despite
expressly preferring the more decentralized U.S. form of the division of powers, followed the
Canadian precedent of incorporating parliamentary institutions on the Westminster pattern. India
and Malaysia were heavily influenced by the Canadian model. It is noteworthy too that most of the
subsequent European federations have incorporated parliamentary rather than presidential-
congressional institutions.

Australia, with bodies such as the Loan Council, the Commonwealth Grants Commission, and the
Council of Australian Governments (COAG), has been a pioneer in the establishment of IGR,
especially in relation to issues of federal finances, but also more broadly. This example has
influenced the establishment of such bodies in India, Pakistan, Nigeria, Malaysia and South Africa.
The German federation, with its emphasis on administrative rather than legislative decentralization
and concomitant interlocking federal-state relationships, has influenced not only a number of
European federations but particularly the cooperative character of the South Africa federation. The
South African federal second chamber, the National Council of Provinces, was an attempt to
improve on the German Bundesrat by incorporating both executive and legislative representation
from the provinces.

17
 3.7. The Building Blocks of Federations (Constituent Units)
The constituent units representing one of the orders of government constitute the building blocks
on which a federation is based. In different federations the basic constituent units have gone by
different names: states in Australia, Belau, Brazil, Ethiopia, India, Malaysia, Mexico, Micronesia,
Nigeria, the United States and Venezuela, ―provinces in Argentina, Canada, Pakistan and South Africa;
―Länder in Austria and Germany; cantons in Switzerland; ―Autonomous Communities in Spain;
Regions and Communities in Belgium; subjects in Russia; ―islands in Comoros and St. Kitts and
Nevis; emirates in the United Arab Emirates and entities in Bosnia and Herzegovina.
 The Number of Constituent Units
The number of constituent units plays an important role in shaping the dynamics of political
relationships within federations. In this respect there has been a great variety among federations. In
nine federations there are 20 or more basic constituent units, the largest number being originally 89
(in 1993) but now 86 (in 2007) subjects in Russia, and 50 states in the United States. The others are
Argentina with 23, Brazil with 26, India with 28, Mexico with 31, Nigeria with 36, Switzerland
with 26 and Venezuela with 23. Having such a large number of constituent units has usually meant
that none of them is in a position to dominate politics within the federation or to individually
counterbalance the federal government. At the other extreme are federations with 2 to 4 constituent
units. Examples are found in three of the micro-federations: Comoros with 3; Micronesia with 4;
and St. Kitts and Nevis with 2. Other examples are Pakistan since 1973 with 4 provinces; Bosnia
and Herzegovina with 2 entities.
 The Size and Wealth of Constituent Units
There are also enormous variations in the size of the constituent units among the contemporary
functioning federations, the largest units – Uttar Pradesh in India with 166 million, Punjab in
Pakistan with 80 million and California in the United States with 34 million – are each larger than
the total population of many federations. At the other extreme, some constituent units in Belau
have barely more than 200 inhabitants, while Kosrae in Micronesia has a population of only 8,000,
Nevis in St. Kitts and Nevis 10,000, and Appenzell– Inner Rhodes in Switzerland 15,000. The
absolute size of constituent units is significant because this may affect the range of functions that
they have the capacity to perform. On the other hand, where constituent units are of the immense
size of Uttar Pradesh in India or Punjab in Pakistan, questions arise about how responsive they can
be to the interests of individual citizens at distance areas.

18
Another important aspect of the size of constituent units is the variation among the regional units
within a federation. Many federations are marked by enormous variations in terms of their capacity
to perform functions and influence on federal policy making. Particularly significant in this
respect are federations where one or two constituents may constitute a majority or nearly a
majority of the federal population. Examples where a single constituent unit contains a majority of
the federal population are the Flemish Region in Belgium (59.7 percent), the Bosniac-Croat
Federation as an entity in Bosnia and Herzegovina (61 percent), Grande Comore within Comoros
(51.3 percent), Chuuk within Micronesia (50.1 percent), Punjab within Pakistan (55.6 percent), and
St. Kitts within St. Kitts and Nevis (75.8 percent). The tensions such a situation may give rise to
are illustrated by the disintegration of such federations as the Federation of the West Indies (1958–
62) where Jamaica, one of ten territories, had 52 percent of the federal population; Pakistan 1956–
71 where one unit, East Pakistan, had 54 percent of the federal population; Czechoslovakia 1920–
92 where the Czech Republic had 66.4 percent of the population; and Serbia and Montenegro
from 1992 until its demise in 2006, where Serbia had 91.8 percent of the population.

Also considerable sources of tensions are cases where two constituent units together have
constituted a majority of the federal population. Examples are Abu Dhabi (41 percent) and Dubai
(26 percent), totaling 67 percent of the UAE population; Ontario (38 percent) and Quebec (24
percent), totaling 62 percent in Canada; Oromia (35 percent) and Amhara (26 percent), totaling
61 percent in Ethiopia; New South Wales (34 percent) and Victoria (25 percent), totaling 59
percent in Australia; and Buenos Aires (38 percent) and Cordoba (9 percent), totaling 47 percent
in Argentina. In most federations there is also a considerable variation in the wealth of their
constituent units, especially in relation to natural resources. As in the case of population, this is
significant in terms of their capacity to perform the functions constitutionally assigned to them.
Also, variations within each federation in terms of their relative wealth have been a factor
affecting the influence of particular constituent units in the dynamics of federal politics.
 Categories of Constituent Units
In most federations there is just one category of full-fledged constitutional units although, their
labels may vary. In a few cases, however, these full-fledged constituent units may be placed into
several categories. Most notable in this respect is Belgium where two kinds of constituent units
were established in 1970 with different jurisdictions assigned to them. Three of the constituent
units (Flanders, Wallonia and Brussels) are Regions territorially demarcated and responsible

19
 mainly for regional economic development, public works, transportation, international trade and
agricultural policy. Three constituent units are culturally defined Communities (Flemish, French
and German) overlapping the Regions and with powers over language, culture, education and
social services such as health care.

The Russian Federation as created in 1993 comprised 89 constituent units in several categories
inherited from the previous Soviet Union. These were 21 republics, 49 oblasts (regions), 6 krais
(territories), 10 autonomous okrugs (districts), one autonomous oblast, and 2 federal cities (Moscow
and St. Petersburg). According to the constitution all have equal legislative and executive powers,
but the republics are distinguished by the fact that they contain significant non-Russian ethnic
populations (e.g., Tartars in Tartarstan, Bashkirs in Bashkortostan, and so on). Oblasts and krais are
non-ethnically based regions. Autonomous okrugs are ethnically based districts that are homelands
to indigenous Aboriginal populations. They are considered separate members of the federation and
parts of the oblasts or krais in which they are located.

Spain, in addition to its 17 Autonomous Communities, has 2 non-indigenous Autonomous

Communities, Ceuta and Melilla (located on the north coast of Morocco), which were granted
eligibility to become Autonomous Communities in 1995. In a number of federations there are
secondary classes of constituent units with less autonomy than the full-fledged constituent units and
with special funding arrangements.

 The Regional Distinctiveness of Constituent Units

In some federations, such as Argentina, Austria, Australia, Brazil, Germany, Mexico, the United
Arab Emirates, the United States, and Venezuela, where there is clearly a dominant language and
relatively low levels of religious or ethnic divisions within the federation, the constituent units have
not represented distinct ethnic, linguistic or religious cleavages. In these cases there have often
been historical and economic regional differences among the constituent units, but not the depth of
distinctiveness engendered by ethnicity, language or religion. Other federations, such as Belgium,
Canada, Ethiopia, India, Nigeria, Russia, Spain and Switzerland, contain constituent units marked
by different linguistic, ethnic or religious majorities. In these, the consciousness of regional
distinctiveness tends to be particularly sharp. The first such federation was Switzerland, which was
established in its current form in 1848, and the second was Canada, established in 1867, but the
number of such federations proliferated in the latter half of the twentieth century.

20
Two strategies have been advocated for dealing with such deep regional cleavages. One is that of
weakening potentially divisive ethno-nationalism by designing the constituent units to prevent
ethnic, linguistic or religious minorities from becoming majorities within constituent units. Among
advocates of this view are Donald Horowitz and Daniel Elazar, building on earlier work by S.M.
Lipset and an earlier American tradition going back to James Madison. This strategy grows out of
a concern at the sharp divisions and secessionism that strong ethno-nationalism can engender.
The objective is to proliferate when possible the multiple points of power away from a focus on
ethno-nationalism. Among federations with ethnic, linguistic and religious differences, this specific
strategy in the design of constituent units was attempted in India originally in 1950 (although
abandoned in 1956) and in South Africa when establishing the boundaries of its nine new
provinces.

An alternative strategy has been to accommodate ethnic, linguistic and regional groups by
establishing regional units within which they may form a majority with the power to protect and
promote their distinctiveness through a measure of self-government. Those advocating this
approach see it as reducing interethnic tension by giving each group a sense of security in
protecting its distinctiveness. Among federations clearly following this path have been Switzerland,
Canada, Belgium, Spain, Russia and Ethiopia. In Switzerland, most of the cantons are
predominantly unilingual and have either a Roman Catholic or Protestant majority. In Canada, the
French-speaking population is heavily concentrated in Quebec, where it constitutes about 80
percent of the population; New Brunswick is officially bilingual and the other eight provinces have
overwhelming English-speaking majorities. In Belgium, the three constituent units labeled
―Communities clearly represent the Flemish-, French- and German-speaking peoples. The Spanish
constituent units, labeled as Autonomous Communities have permitted the re-emergence of historic
nationalities as political entities. While the predominant ethnicity and language in the Russian
Federation is Russian, the republics and the autonomous okrugs specifically represent non-Russian
ethnic populations. Ethiopia as a federation was explicitly established to recognize its diverse
ethnic groups.

It is also significant that over time both India and Nigeria have found it necessary to follow this
approach. Originally, India, fearing it would sharpen divisions, resisted defining the states on the
basis of language, but beginning with the States Reorganization Act in 1956 and during the
following decade, state boundaries were redrawn largely on linguistic lines and in the case of
21
 Punjab taking religious differences into consideration; subsequently, the process was continued
further to recognize some smaller new states in the northeast. Nigeria, too, which at the time of
independence in 1960 consisted of 3 large regional units, has since 1963 progressively increased
the number of states to a total of 36, largely defined to reflect distinct linguistic, ethnic and
religious groups.
3.8. Federal Capitals
Every federation faces the difficult task of deciding how its federal capital should be governed. The
problem is a difficult one because usually it involves a conflict of interests. The federal government
usually wishes to control and develop the capital and the seat of federal government in the interests
of the federation as a whole. If the capital is itself a member state or comes under the jurisdiction of
one of the members states, then that state is in a position to dominate the federal capital, and the
control of the federal government over its own seat of government is restricted. On the other hand,
the citizens of the capital city usually wish to govern themselves to the greatest extent possible,
rather than being controlled by the federal government. These issues are compounded by the fact
that federal capitals are often characteristically large and rapidly growing cities with populations
spilling beyond the legal boundaries of the central city into the neighboring territory. The objectives
usually sought in the organization of federal capitals include generating a pride throughout the
federation in its capital; meeting the needs of the federal legislature, ministries, security and foreign
diplomatic representatives; and avoiding the appearance of favoring one particular state or province.
Broadly speaking, there are three main types of constitutional organization for the government of
federal capitals: a federal district, a city-state, and government under the jurisdiction of one of the
states. Each has its own advantages and peculiar problems.

Many but by no means all federations have established a federal district or territory under the
exclusive jurisdiction of the federal government as the way of governing the federal capital. Eight
significant examples are Washington, DC (USA), Canberra, the Australian Capital Territory
(Australia), the Federal District of Mexico City (Mexico), the Federal District of Caracas
(Venezuela), the Union Territory of Delhi (India), the Capital Territory of Islamabad (Pakistan),
Abuja Federal Capital Territory (Nigeria) and the Federal Capital City of Addis Ababa (Ethiopia).
Among the advantages of this type of arrangement is that it gives the central government sufficient
control over the planning and development of its own capital. It avoids having the laws of any one

22
member state dominating the capital of the whole federation, or imposing its legal and cultural
dominance on the federal capital.

Among the disadvantages of the federal district type of arrangement is the tendency for there to be
too much central control over local residents. In many of these cases, there is no locally elected
government, and in a number of them the residents also do not elect representatives to the federal
congress or parliament. Generally this has worked well, but it can create problems where different
political parties dominate the federal government and the elected local council. A further
disadvantage with the federal district arrangements is that if they are not made large enough to begin
with, problems arise when the urban population spreads beyond their boundaries (e.g., Buenos
Aires, Caracas, Mexico City, Washington) especially since boundary changes requiring
constitutional amendments are usually difficult to implement.

In terms of the appropriateness of this form of federal capital organization, it exists in both
centralized and decentralized federations and for large and small capital cities. It has been a
particularly popular arrangement when new capitals have been established where there was
previously no significant local population. While this form of capital organization has also been
created around existing old cities, general experience suggests that in this type of federal capital
organization the predominant legal, financial and political power of the federal governments tips the
balance between central control and local interests strongly in favour of the former. It may be worth
noting that in a few cases non-capital cities have been given a similar special status in the form of
federally chartered cities, an example being Dire Dawa in Ethiopia.

In some cases, the federal capital is given the status of a full-fledged state within the federation.
There are four notable examples: Vienna (Austria), Moscow (Russia), Berlin (Germany since
reunification 1990), and Brussels (Belgium). It should be noted that Brussels also serves as the
capital of the EU. There are other cases of federations containing non-capital city-states as full-
fledged member states that have worked quite effectively (e.g., Bremen and Hamburg in Germany,
and St. Petersburg in Russia). As an arrangement for a federal capital, in contrast to the federal
district form of organization, status as a full-fledged member state ensures local self-government
while at the same time avoiding subservience to one of the other member states.

The disadvantage of this arrangement is that because of the autonomy intrinsic with full statehood,
the federal government is left with minimal control over its own seat of government. Furthermore,

23
because of the usual rigidity of state boundaries, if the area is not big enough at the time of creation,
a subsequent spillover of population may create problems with neighbouring states or regions. This
is exemplified by the spillover of population from Brussels into the Flemish Region and by the as
yet unsuccessful efforts to merge Berlin and Brandenburg in Germany. Where the capital is very
large and has many industrial and other substantial interests not directly related to its functions as a
capital, there is a case for this arrangement. To some extent its appropriateness depends significantly
on the degree of decentralization in the powers assigned generally to the states. Where the federation
is relatively centralized, as in Austria, Germany and Russia, the federal government may have
sufficient powers to influence the operation of the capital even though it is a city-state. Where,
however, the federation is significantly decentralized, this arrangement may severely limit the scope
of the federal government to control and develop its capital.

In some federations there is a third arrangement. The capital city comes under the jurisdiction of the
member state within which it is located, in a manner broadly similar to other cities within that state.
Eight examples are Bern (Bern, Switzerland), Ottawa (Ontario, Canada), Kuala Lumpur (Selangor,
Malaysia), Bonn (North Rhine Westphalia, Germany, during 1949–90), Madrid (Madrid
Autonomous Community, Spain), Basseterre (St. Kitts, St. Kitts and Nevis), Pretoria (Gauteng,
South Africa) and Abu Dhabi (Abu Dhabi, United Arab Emirates). In many of these cases, the
federal capital is situated in the largest member state, and sometimes, as with Bern, Basseterre and
Abu Dhabi, it is also the capital of that state. Two advantages of this arrangement are that the
management of the boundaries of the federal capital with the neighbouring areas is open to
flexibility, and that it has usually provided for the general operation of local self- government in the
federal capital in the same way as elsewhere in the state of which it is a part. This arrangement,
however, clearly limits the degree to which the federal government can manage the development
and control of its own capital city. This has been the case particularly in more decentralized
federations such as Switzerland (Bern) and Canada (Ottawa). In the case of Canada, federal
government influence over the capital district has been mainly through spending on the National
Capital Commission and public works. In such cases, it has required a high degree of voluntary
intergovernmental cooperation between the federal government and the canton within whose
jurisdiction the federal capital falls.

Generally speaking, state-governed federal capitals (especially in decentralized federations) have

enjoyed a high degree of self-government, but they have suffered from problems of divided
24
jurisdiction, financial insufficiency, cultural domination by the governing state, and limitations upon
the ability of the federal government to control its capital city in the interests of the federation as a
whole. In more centralized federations where the scope of the state government jurisdiction is more
limited, this has to some extent been less of a problem.
3.9. Distributions of Finance
 The Distribution of Revenue Powers
A number of conflicting principles are involved in the effective assignment of revenue-raising
powers among governments in federations. Some principles point to the desirability of federal
assignment and some to assignment to the constituent units. Among the advantages of assigning to
Federal government; Administrative advantages of centralizing certain kinds of revenue levying
and collection, avoiding tax competition among constituent units and to realize equity. This may
require a concentration of revenues in the federal government in order that it may play a
redistributive role to avoid sharply different tax levels among constituent units with varied wealth.
On the other hand, advocators of assignment for Constituent units argued that giving revenue
powers for constituent units have the following advantages; to enhance accountability of
governments to their electors, tax competition as a positive encouragement to better policies among
governments and desirability of constituent unit autonomy rather than dependency upon federal
transfers.

There are three sources of government funds

a. Taxation
b. Public borrowing
c. Operation of public corporations and enterprises
 Allocation of Tax Powers
Most federations specify in their constitutions (or in the case of Belgium in special legislation) the
revenue-raising powers of the two orders of government. These powers may be exclusive,
concurrent or shared. Where they are concurrent the paramount rules determine the ultimate
authority in cases of conflict. Where both orders share a tax field, they can both levy taxes with no
constitutional limit, the only constraints being political in the form of the taxpayers‘ tolerance and
the politicians‘ reluctance to bear the blame. The major taxing powers usually identified are;
 Customs and excise
 Corporate taxes
25
  Personal income taxes
 Various sales and consumption taxes.
Customs and excise taxes have almost always been placed under federal jurisdiction in the
interests of ensuring an effective internal customs and economic union. Corporate income taxes
have also most often come under federal jurisdiction because corporations in earning their income
tend to cross the boundaries of the internal regional units, and the location of their headquarters
does not necessarily reflect the geographical sources of their income. Nevertheless, in some
federations this taxation may be shared and if so usually comes under concurrent jurisdiction.
Personal income taxes may be more directly attributed to location of residence and therefore is
often an area shared by federal and regional governments, although in some federations it has been
exclusively federal (e.g., Austria and India). Sales and consumption taxes are areas which in most
federations both federal and regional governments share, although there are some exceptions to this
pattern.

A common characteristic of the allocation of fiscal powers in nearly all federations is that the
majority of major revenue sources have been assigned to the federal governments. Even where
some tax fields are shared or placed under concurrent jurisdiction, the federal governments tend to
predominate because of the federal power to pre-empt a field of concurrent jurisdiction and
because of provisions limiting the range of tax sources, both direct and indirect, that regional
governments have been assigned. In the mature federations the contemporary range of federally
levied revenues as a percentage of total federal, state and local revenues generally ranges from 40
percent in Switzerland to 65 percent in Germany with Australia as the outlier at 75 percent. Among
emergent federations the contemporary range is from Brazil with 69 percent to Nigeria at 98
percent.
 Natural Resource Revenues
One controversial area in a number of federations where natural resources are concentrated in some
regions and not in others, whether the taxing powers and royalties have been lie with the federal or
regional governments. Federations had a significant share of global oil (48 percent) and gas (59
percent) in 2006, and therefore the issue of allocation of natural resource revenues has been
important. Because the concentration of resources in some regions can lead to enormous disparities
in the wealth of the constituent units, this has been a contentious issue in such federations as
Canada, Nigeria, Russia, Argentina, Mexico, Venezuela, Sudan and Iraq. In Nigeria and Iraq,
26
 petroleum resources account for over 90 percent of government revenues; in Sudan and Venezuela
for over half and in Russia for about thirty percent.

Natural resource revenues come principally from royalties, license fees, export taxes and
corporate taxes. In those federations which are rich in natural resources such as oil, gas,
diamonds, and some metals, these are typically extremely unevenly distributed among the
constituent units. Inevitably there have been sharp debates about who should collect the revenues
from these resources and whether they should benefit the federation as a whole or the constituent
unit in which they are located, and in the latter case whether they should be taken into account in
efforts to equalize the revenues of the constituent units. In most federations with twentieth century
constitutions, the federal government largely controls resource development and revenues.

In Canada, the provinces own their resources, and this has meant that Alberta with its oil resources
has vastly more revenue per capita than other provinces. The Canadian equalization systems brings
poorer provinces up to the national standard, but does not bring the richer provinces down and it
could not afford to bring all provinces to anything close to Alberta‗s fiscal capacity. Furthermore,
the federal government has lost its powers to apply export taxes to energy exports. Consequently,
Canada has had a major debate over how to treat natural resource revenues for the purposes of
equalization, with poorer resource producing provinces arguing that their equalization entitlements
should not be reduced on this account.

In the United States, most resources are owned by the states or private individuals, but there are also
extensive federal lands in the western states and Alaska. Alaska‗s resource revenues have permitted
annual payments to citizens. In Nigeria where natural resources are the overwhelming source of
revenues, the federal government collects these and makes transfers to the states on a variety of
criteria of which ―derivation is one. This has meant significant more per capita revenue for the
producing states, but because they are underdeveloped and poor they have complained that this
share is inadequate. In addition, the producing states want a greater say in the actual management of
the resources, which has often been done in an environmentally damaging fashion and with little
regard for the local population. The seriousness of this issue, complicated by considerable
corruption and lack of transparency regarding what happens to resources revenues, has fed a
continuing insurgency in the oil- producing region.

27
In Russia, after a period when it was highly decentralized the federal government has reasserted
control of the levying and collection of royalties and export taxes on natural resources. Producing
subjects of the federation now get only about 5 percent of the oil revenues and none of the gas
revenues. Russia has taken advantage of its very high petroleum revenues to pay off much of its debt
and to create a long-term revenue stabilization fund. In both Sudan and Iraq the issue of whether
resource revenues belong to the country as a whole or to the producing regions has been a highly
contentious issue. Mexico has a highly centralized regime based upon a state oil company and in
2006 committed one half of surplus revenues (those exceeding the five-year mean price) to be
shared between the states and municipalities.

In addition to taxation there are two other important sources for governmental rising of funds. The
first is public borrowing, a source open to both levels of government in most federations, although
foreign borrowing in some cases (most notably Austria, India and Malaysia) is placed under
exclusive federal jurisdiction. In the case of Australia, all major public borrowing by both levels is
coordinated through the operation of the intergovernmental Loan Council. The second source is the
operation of public corporations and enterprises, the profits of which may serve as a source of
governmental income. In most federations this latter is a revenue source for both levels of
government.
 The Allocation of Expenditure Powers
Broadly speaking, the distribution of expenditure powers in each federation corresponds to the
combined scope of the legislative and administrative responsibilities assigned to each government
within the federation. But several points should be noted. First, where the administration of a
substantial portion of federal legislation is constitutionally assigned to the governments of the
constituent units as in Switzerland, Austria, Germany, India and Malaysia, the constitutional
expenditure responsibilities of the regional governments are significantly broader than would be
indicated by the distribution of legislative powers taken alone.

Second, the expenditure requirements of different areas of responsibility may vary. For instance, in
relative terms health, education and social services are higher cost functions by comparison with
functions relating more to regulation than the provision of services. Third, in most federations the
spending power of each order of government has not been limited strictly to the enumerated
legislative and administrative jurisdiction. Governments have usually been taken to possess a
general spending power. Thus, federal governments have used their general spending power to
28
 pursue certain objectives in areas of state jurisdiction by providing grants to regional governments
that otherwise could not afford to provide the services being demanded of them.
 The Issue of Vertical and Horizontal Imbalance
Virtually every federation has found the need to correct two kinds of financial imbalances. The
vertical imbalances occur when constitutionally assigned federal and unit government revenues
do not match their constitutionally assigned expenditure responsibilities. These imbalances occur
generally for two reasons. First, it has usually been found desirable to allocate the major taxing
powers to the federal government because they are closely related to the development of the
customs union and more broadly to an effective economic union, while some of the most expensive
expenditure responsibilities such as health, education and social services have usually been
considered best administered on a regional basis. A second reason for vertical imbalances is that
no matter how carefully the original designers of the federation may attempt to match the revenue
resources and expenditure responsibilities of each order of government, over time the significance
of different taxes change (such as income and consumption taxes) and the costs of expenditures
vary in unforeseen ways. Consequently, there is a need to build in processes whereby these
imbalances can be adjusted.

Horizontal imbalances represent a second form that requires correction. Horizontal imbalances occur
when the revenue capacities of different constituent units vary so that they are not able to provide
their citizens with services at the same level on the basis of comparable tax levels. In addition to
horizontal revenue imbalances, there can also be interprovincial imbalances on the expenditure side
due to differences in the expenditure needs of different constituent units because of variations in
socio-demographic characteristics of their populations, such as population dispersion, urbanization,
social composition and age structure, and the cost of providing services affected by such factors as
the scale of public administration and the physical and economic environment.

 Conditional or Unconditional Transfers

In order to correct these imbalances most federations have arrangements for financial transfers
from one level of government to another. Because federal governments generally have controlled
the major tax sources, adjustments have usually taken the form of transfers from the federal to the
regional units of unconditional block grants or specific- purpose conditional grants, and to remove
horizontal imbalances through assistance to poorer units.

29
The degree of provincial or state dependence is affected not only by the proportion that federal
transfers represent in their revenues but even more by whether these transfers are conditional or
unconditional in character. Federal transfers to regional units of government may have conditions
attached to them in order to influence how they are spent. This golden lead, as it is referred to in
Germany, may however undermine the autonomy of the regional units of government, especially if
conditional transfers constitute a high proportion of the transfers and hence a significant portion of
total state or provincial revenues. To avoid this, transfers may take the form of unconditional
transfers (either through revenue sharing by set percentages of certain federal tax proceeds, as
occurs in many of the newer federations, or unconditional block grants).

 Equalization Transfers
The importance of equalization transfers lies in the view that all citizens within a federation
should be entitled to comparable services without having to be subject to excessively different tax
rates. The need for such transfers has arisen in most federations from recognition that disparities in
wealth among regions within a federation are likely to have a corrosive effect on cohesion within a
federation. Indeed, it is for this reason that in most European federations equalization transfers
have been labeled-solidarity transfers. The arrangements for equalization transfers have varied
from federation to federation. Several points are especially noteworthy.

First, the extent of the equalization transfers varies considerably. Most federations, with the
exception of the United States and Mexico, have some formal equalization scheme, but the scope
of such transfers has been greater in some (such as Germany, Canada and Australia) than in others
(such as Switzerland). Second, in all but the German case and in the proposed Swiss reforms,
equalization is achieved totally by redistribution effected by federal transfers to the poorer regional
units of government. Germany has been unique in providing constitutionally for interstate transfers
to cover a substantial portion for adjusting horizontal imbalances. Third, in Canada the effort to
correct horizontal imbalances through federal equalization payments has focused primarily on
adjusting for differences in the revenue capacities of the provinces. While this approach is typical
of many federations, in some and most notably in Australia, there has been considerable effort to
account as well for equalizing expenditure imbalances. Fourth, the form of equalization transfers
to regional units of government varies. There are those that are based on an agreed formula, e.g.,
Switzerland, Canada, Germany, Austria, Malaysia, Belgium and Spain. In others, notably

30
 Australia, India, South Africa and Nigeria, the allocations have been based largely on the
recommendation of standing or periodic independent commissions.

Fifth, in some circumstances there may be a relationship between the degree of decentralization in
a federation and the need for equalization arrangements. The more fiscally decentralized a
federation is and the greater the interstate disparities in revenue capacity and expenditure need, the
greater is likely to be the need for equalizing mechanisms to promote horizontal balance. Sixth, the
size of regional fiscal disparities varies greatly among federations, and where these are large it is
harder for the federal government to afford to apply full equalization. Furthermore, the ability of
the federal government to afford full equalization is affected by the extent to which revenue
sources are centralized.
 Processes and Institutions for Adjusting Financial Arrangements
Because, as already noted, the values of revenue resources and expenditure responsibilities change
over time, federations have found it necessary to establish processes and institutions to facilitate
dealing regularly with vertical and horizontal imbalances. It is noteworthy that in those federations
characterized by a separation of executive and legislative powers within each order of government,
such as the United States, the primary arena is the federal legislature. In the other federations
characterized by fused parliamentary executives, the primary arena has been that of executive
federalism, i.e., negotiations between the executives representing the federal and regional units of
government.

In terms of the processes for adjusting issues of federal finance, four distinct patterns can be
identified. In Australia and India, expert commissions established by the federal government have
been entrusted with the primary task of determining distributive formulae. That in Australia is a
standing commission, while that in India is quinquennial and established by constitutional
requirement. These commissions hear representations from the state governments and report to the
federal government which normally follows their recommendations. South Africa with its Financial
and Fiscal Commission follows this general pattern, but in practice the central Finance Ministry has
more often departed from the Commission‗s recommendations, thus weakening its value as an
independent authority. Nigeria has had a long history of finance commissions dating back to the
Phillipson Commission of 1946, and up to the National Revenue Mobilization, Allocation and Fiscal
Commission since 1989. A feature of the current Nigerian financial arrangements, derived from the
original concept of a Distributive Pool introduced by the Raisman Commission in 1958, is that
31
nearly all of the revenues are levied by the federal government, though most of them go into a
Federation Account. Allocations are made from this Federation Account to the federal, state and
local governments on the recommendation of the National Revenue Mobilization, Allocation and
Fiscal Commission.

A second pattern is the constitutional provision for an intergovernmental council composed of

federal and state representatives, the Malaysian National Finance Council and the Pakistan
quinquennial National Finance Commission being examples. A third pattern is exemplified by
Germany, Austria, Switzerland, Belgium, the United States, Brazil and Argentina, where grants to
the states are determined by the federal legislature, but since there are formal representatives of
the states in the federal legislature, state representatives are involved in the approval process
(although arrangements vary in these federations).

A fourth pattern is found in Canada, where the determination of equalization formula, other tax
transfer programs and tax agreements, are under the control of the federal government whose
legislature contains no provision for formal representation of regional governments.

3.10. Intergovernmental Relations

 Forms and Extent of Intergovernmental Relations
An important element of intergovernmental relations that occurs within federations is carried out
informally through various means of direct communication (e.g., by letter and telephone) between
ministers, officials and representatives of different governments at various levels with each other.
In addition to these there are in most federations a range of more formal institutions to facilitate
intergovernmental relations. These have usually taken the form of a variety of standing and ad hoc
meetings involving ministers, legislators, officials and agencies of different governments. A
noteworthy feature, especially in parliamentary federations where first ministers and cabinet
ministers responsible to their legislatures tend to predominate within both levels of government, is
the prevalence of ―executive federalism, i.e., the dominant role of governmental executives
(ministers and their officials) in intergovernmental relations. The institutions and processes of
executive federalism have usually developed pragmatically rather than by constitutional
requirement, but in such federations as Canada, Australia, Germany, India and Malaysia they range
extensively from meetings of officials to councils of ministers.

32
An interesting development in Australia was the establishment in 1992 of the Council of Australian
Governments to oversee the collaborative processes and particularly to make the operation of the
Australian economic union more effective, but after an active period in its first few years its
influence has varied with the emphasis put on its activities by the Australian prime minister.
Another interesting development was the intergovernmental cooperative framework established in
Canada in the form of the ―Framework for Improving the Social Union for Canadians signed by the
federal government and nine of the provinces (but not including Quebec) on 4 February 1999. This
was intended to commence a new era of federal-provincial cooperation, collaboration and
information-sharing in creating and financing social programs and includes a dispute resolution
mechanism.

Among contemporary federations, executive federalism in intergovernmental relations is probably

the most extensively developed in Australia and Germany, with the Bundesrat serving as the
centerpiece in the latter. In India, the activation of the Inter-State Council (provided for in the 1950
constitution) recognized in the 1990s the increased importance of processes for formal
intergovernmental relations within a federation marked by multiple political parties. While
executive federalism has not developed in Spain as far as in Australia, Canada and India, a Council
of Autonomous Community Presidents was formed recently, and it has biannual meetings with the
federal prime minister. Nevertheless, multilateral networks as opposed to bilateral relations
between Madrid and the communities are still relatively underdeveloped. This may have been
influenced by the bilateral laws governing relations with each community.

Where there has been a separation of legislative and executive powers within each government of a
federation, as in the United States, the Latin American federations and Switzerland, channels for
intergovernmental relations have been more dispersed. These have involved a variety of channels
between executives, administrators and legislators in different governments often in crisscrossing
patterns. A notable feature has been the extensive lobbying of federal legislators by various state
and cantonal representatives. Nevertheless, some presidential regimes have had strong executives.
Notable examples are Russia under the Putin regime, some Latin American federations such as
Mexico up to 2000, currently Venezuela, Nigeria since 1999, Ethiopia, and Pakistan in the early
years under President Musharraf. In a number of these cases the presidential power has been
derived from the dominance of a presidential party that is in control of the federal legislature.

33
An important factor affecting the character of intergovernmental relations within a federation is the
character of the political party regime. Where a single party (or alliance) has dominated politics
within both orders of government, as in India in the early decades with the Congress party, in
Malaysia with the Alliance party, in Mexico up to 2000 with the predominance of the PRI, and
currently in South Africa and Ethiopia, federal party leaders have had great influence over the party
leaders and organizations in the constituent units. In these cases, many of the intergovernmental
issues have been virtually dictated by the federal government or have been resolved through party
channels. In federations where different parties predominate within different levels, as has often
been the case in Canada, Australia, and in recent years India, the formal intergovernmental
processes and institutions have been the major channels for negotiating cooperative arrangements.

The need for extensive intergovernmental relations has been further increased in those federations
where there is a constitutional requirement that a considerable portion of federal legislation must be
administered by the governments of the regional units. This has been a major factor contributing,
for example, to the interlocked federalism for which Germany is especially noted. Most federations‘
intergovernmental institutions and processes have been particularly important for the regular
adjustment of financial arrangements and transfers. In virtually every federation intergovernmental
relations have had both vertical and horizontal dimensions. In addition to relations between the
federal and constituent unit governments there have been inter-unit relations. These have often
dealt with cross-boundary issues affecting neighboring states or provinces, for example, jointly
shared rivers, transportation routes or environmental issues. In addition there are often efforts by
regional groupings of states or provinces to cooperate. Sometimes inter-unit efforts at cooperation
have been extended even more broadly to encompass all the states or provinces within a federation
to deal cooperatively with issues of wider scope without resort to the centralizing impact of relying
on federal government action.

 Cooperative versus Competitive Federalism

The unavoidability of interdependence and the need for intergovernmental institutions and
processes to deal with this has led to an emphasis on cooperative federalism within most
federations. But equally significant is the concept of competitive federalism. In many federations,
but particularly in Germany during the past decade as the internal interlocking relationships of the
federation have come under critical review, there has been considerable debate about the relative
merits of cooperative and competitive federalism. Analysis indicates that there are benefits and
34
costs associated with each approach. Cooperative federalism contributes to the reduction of
conflict and enables coordination, but when it becomes interlocking federalism, to the extent
experienced for example in Germany, it may lead to the joint decision trap which reduces the
autonomy and freedom of action of governments at both levels. Furthermore, where executive
federalism predominates, it may limit the role of legislatures. Nevertheless, virtually every
federation has found that it is impossible to isolate the activities of the different levels of
government in a federation into watertight compartments. Given the unavoidability of overlaps of
jurisdiction, cooperative federalism in the form of intergovernmental collaboration has proved
necessary in all federations.

On the other continuum, advocators of competitive federalism argue that competition between
governments in a federation may actually produce beneficial results for citizens. For example, an
economic competition produces superior benefits compared to monopolies or oligopolies, so
competition between governments serving the same citizens is likely to provide citizens with better
service. Advocators of competitive federalism equated cooperative federalism with collusion directed
at serving the interests of governments rather than of citizens. Competition among governments
may take vertical (federal-state) or horizontal (inter-state or inter-provincial) forms. In the case of
the latter, advocates of competition often criticize equalization arrangements because they suppress
competition. But it must be noted that, while competition does not necessarily equate with
conflict, competitive federalism to excess, as Canadian experience indicates, can lead to
intergovernmental conflict and acrimony and have a divisive impact within a federation.

It should be noted that virtually all federations combine elements of cooperation and competition.
Thus, for instance, while the culture of cooperation has been important in Switzerland, there is
considerable tax competition among the cantons. Federations generally are characterized
simultaneously by elements of cooperation, collaboration, coordination, collusion,
competition and conflict coexisting and changing over time. The extent to which elements of
cooperation or of competition prevail among governments within different federations has varied,
however.

35
4. The Ethiopian Experience
4.1. Origin of the Federation: Historical and Theoretical foundations
Historical Theoretical
 Plots and conspiracies: feeling of  Explanation to the state crisis and
resentment by the emperor‘s exile and suggested solutions
appointment of bandas (Dej.Belay Two perspectives:
Zeleke, Bit. Negash Bezabih and i) The concentration of power and
Bilata Takele W/Hawaryat ) resource at the center and controlled
 The 1960 coup. (the Nway brothers) by one group and the subsequent
 Peasant rebellion / Tigray, Gojjam, marginalization of other Ethiopian
Bale/ masses (class struggle)
 Students movement (land to the tiller ii) The ethno cultural injustice ; the
and Nationality questions) presence of national operation and
 The Revolution (it was a surprise for marginalization of ethnic groups of
both) Ethiopia (struggle based on ethnic
 Armed struggle line)

iii) From the political spectrum, the main reason for Ethiopian federalism is the conviction that
federalism is the only option to maintain the multi ethnic and multi cultural society of
Ethiopia and to maintain peace and security.
iv) Hence, it was the reaction for the past ethno-cultural injustice
4.2.Historical Landmarks
As a result it appears with many unique features in comparison with other federations Ethiopia was a
defacto federal sat in its past history. b/c there was plurality of kings with king of kings. Niguse Negest
signifies some kind of federal or con federal structure. However, the decentralized feudal state structure
changed dramatically with the emergence of strong centralized imperial and military regimes/1930-74
&1974-91/ respectively

36
 4.3.Ethiopia-Eritrean Failed Federation, 1952-1962
The territory now called Eritrea was historically an integral part of Ethiopia since the Axumite Era in the
first century AD. Eritrea did not exist as an entity of its own prior to 1890 when it was created by Italy.
Between the years 1869-1889 Italy insisted on expanding southwards, despite suffering defeats brought
upon them by Ras Alula at Dogali. However, in January 1890, Eritrea was born as an entity under the
control of Italy. As a result, from 1890 until its liberation in 1941, Eritrea was administered as a colony by
the Italian colonial Ministry, under a governor nominated by the Italian king.

After liberation Eritrea remained under British rule till 1952. After World War II Italy renounced all right
and title to its colonies and the Treaty of Peace signed in Paris in 1947 provided for the final disposal of
the former Italian colonies to be determined by agreement among the four allied powers: the USA, USSR,
UK and France. Failing agreement, the matter would be submitted to the UN General Assembly for
disposition. The four victorious allies established an investigating committee to come up with a proposal
on the future of Eritrea. The United States based on its interest in the region and good relations with the
Emperor was keen to see Eritrea joined to Ethiopia in unity. The USSR and some Afro-Arab countries
were on the other hand opposed to this move. To end this issue, In November 1949 the General Assembly
set up the United Nations Commission for Eritrea, constituting members from Burma, Guatemala,
Norway, Pakistan and South Africa whose task was to visit Eritrea and after taking into account the
interests of the inhabitants and the interests of all the countries involved to report its findings to the UN.
The findings were however divided. Burma and South Africa proposed federation with Ethiopia, Norway
proposed union with Ethiopia while Pakistan and Guatemala proposed UN trusteeship for ten years and
independence to follow thereafter. The proposal by South Africa, Norway and Burma, constituting a
majority, was finally approved by 46 to 10 with four abstentions. By proclamation Number 124 of 11
September 1952 the Eritrean Constitution with the Federal Act was put into force in Negarit Gazetta. At
this point in time, the federation of Eritrea with Ethiopia came into effect

The Federal Act as well as the Eritrean Constitution provided for a federal arrangement between the two
governments. According to the Constitution, Eritrea is an autonomous unit federated with Ethiopia under
the sovereignty of the Ethiopian Crown. The government of Eritrea was authorized, as a manifestation of
its autonomy, to exercise legislative, executive and judicial powers. The actual division of power under
the federal act vested a number of basic functions in the federal government: notably defense, foreign
affairs, currency and external trade while reserving residual powers to the Eritrean government. These
included civil and criminal law, police, health, education, natural resources, agriculture, industry and
37
internal communication. Many controversies arose over the ambiguity of some of the concepts included in
the documents as well as over the whole federal compromise. There seemed a consensus though that the
term autonomous unit signified not a sovereign state but rather a politically organized unit linked federally
with Ethiopia and that the phrase under the sovereignty of the Ethiopian crown implied that the federation,
not the autonomous unit, enjoyed sovereignty.
More controversial were the status of the federation and its subsequent dissolution in 1962. Closer
observation of the 1955 Constitution and the Eritrean Constitution seems to suggest that Eritrea was
only an autonomous region rather than a full-fledged unit in a federation, as we understand it today.
The Resolution characterized Eritrea as an autonomous unit federated with Ethiopia under the
sovereignty of the Ethiopian Crown. It did not accord Eritrea the status of a state in a federal union
with Ethiopia. In a federation resulting from two units, one would expect there to be three institutions.
The two constituent units and one other overarching federal government for both of them.
Furthermore, a supreme constitution which both units submit to, is a requirement. None of them
existed in the UN sponsored federal compromise. The Resolution had provided for a Federal Council,
an institution that was a faint approximation of a federal body. This body was to comprise Ethiopian
and Eritrean representatives in equal numbers and advise the Emperor on matters of the federation.
The Council was simply ignored and practically done away with before it could even start
functioning. As a result, the federal powers belonged to the Ethiopian government. The Ethiopian
Emperor was the sovereign, the Ethiopian courts were the federal courts and the Ethiopian Ministers
were the ministers of the federal government.95 Tekeste states, „For all intents and purposes the
resulting relationship between Ethiopia and Eritrea was not in the least federal. Even according to the
intentions of the union, Eritrea was not granted a federal status but only a status of autonomy.‟
However, this constitutional ambiguity could not serve as a justification for not implementing even the
regional autonomy. Even Eritrea‘s mere status of autonomous region was not tolerated by Haile Selassie‘s
regime. In 1958 the Eritrean Assembly voted unanimously to abolish the Eritrean flag and use only the
Ethiopian flag. In 1959 the Ethiopian penal code replaced the existing legislation in Eritrea. In 1960 the
Eritrean assembly voted unanimously to change the name Eritrean government to Eritrean administration
and other adjustments connoting its lower position than a federation. On 14 November 1962 again the
Assembly voted unanimously for the abolition of the federation.

38
 4.4.The Transitional Charter of 1991
The change of government in 1991 in Ethiopia has become a stepping stone to effect fundamental
transformation in the political arrangement of the state. The new government took a sweeping
measure in rearranging the state in to federal state arrangement based on ethnic criteria. However,
these measures were not implemented overnight since there were some legal and political
backgrounds before the entrenchment of the federal structure in to a constitution. The transitional
charter laid the basis for the issuance of legal documents that brought the federal structure in to effect.
The first of this document was proclamation no 7/1992 that established the 14 regional governments
without explicitly recognizing the state structure as federal. The task of putting the federal structure in
to concrete reality was finally done through the 1995 constitution. The charter has its own peculiar
contributions and marked another discontinuity in the constitutional development in Ethiopia. It was a
very short document that addressed only some fundamental issues.

The charter puts a high premium on human rights. On its article (1) it stated that such rights will be
practiced on the basis of Universal Declaration of Human Rights ( UDHR ) and individual human
rights are respected fully and without any limitations what so ever. Specific emphasis was also given
on freedom of conscience, expression, association, assembly, demonstration and the right to organize
political parties, if such acts do not infringe up on other‘s right. Article (2) is mainly devoted to
recognizing rights of nationalities and peoples of Ethiopia, accordingly nationalities were allowed to
administer themselves in their own jurisdiction and to be fairly represented at the level of federal
government. It was also approved that all nationalities can promote their language, history, culture
and preserve their identity. If the above-mentioned rights are not respected they can ask independence
from the Ethiopia state.

Even if the charter acknowledged the right of nationalities to administer themselves, it has said
nothing about the establishment of federal structure for Ethiopia. But the inclusion of such rights
implied the envisaged structure to be a federal type. The provision on the charter gave only implicit
recognition to the establishment of federal structure since one can deduct that nationalities can
administer their own affairs with the institution of a federal state structure. The process of
decentralization initiated by the Charter was further elaborated by National/Regional Self-
Government Establishment Proclamation No.7/1992.

39
 4.5.The Post-1995 Federal System
Ethiopia is an ethnically diverse country with a past political history of ‗ethnic domination‘. Ethiopia
ethnic federalism is designed to address the ‗national question‘ (a popular name for the 1960s
struggle against ethnic domination in Ethiopia). To address this question, Article 39 of the federal
constitution stipulates that every ethno- cultural community has the right to self-determination.
Accordingly, there are nine regional states. Tigray, Afar, Amahara, Oromia, Somali regional states
(taking the name of their dominant native inhabitants) are more or less ethnically homogeneous with
a dominant majority ethnic community at regional level. The remaining states (the South Nation
Nationalities and Peoples (SNNP), Gambella, Benishangul Gumuz and Harari) are multiethnic
without a dominant ethnic community. Furthermore, the federal constitution seems to prioritize the
rights of ethno-cultural communities over individual freedom.

The Constitution of the Federal Democratic Republic of Ethiopia (FDRE) came into force in August
1995 after passing through drafting and series of deliberations by bodies set up by the Transitional
Government. The text of the Constitution which gives the ownership of the same to ―Nations,
Nationalities and Peoples of Ethiopia‖ (Preamble cum. Art.8 of FDRE Constitution) established a
federal state by dividing and sharing power between the federal and state governments (Art.46, 47,
56, 57). Reducing the number of states recognized by the Transitional Charter by five the
Constitution enumerates nine states constituting Federal Democratic Republic of Ethiopia and
currently the former SNNP split into four and scale up Ethiopia‘s region to twelve (12). In line with
federal traditions the Constitution stipulated two layers of legislative, executive and judicial organs.
Accordingly a parliamentary government is set up at the federal level with bi-cameral legislature.
4.2. The Ethiopian Brand: Some Distinct Features of the federation
The Ethiopian federation was born out of the concern of ethno-nationalist groups‘ the right to self-
determination. It is the result of an old age quest for ethno-cultural injustice. Hence it manifested a
number of unique features.
 Explicit recognition of ethnicity as a building bricks of the federation
 The preamble: ―We the Nations Nationalities and Peoples of Ethiopia…‖
 Ethno linguistic criteria as the basis for state formation ( boundary of states) (Art. 46.2)
 Granting sovereign political power to the Nations, Nationalities and Peoples (Art. 8)
 Equal recognition of all languages in the country (Art.5)

40
  The recognition of the right to secession (Art.39.1) Unconditional right to self-
determination including secession.
 It remained controversial among the Ethiopian political actors. There are two arguments;
 Proponents of the right to secession
 It is a source of confidence to ethnic groups to be a member of the federation
 It is a key to unity since ethnic groups feels at home
 It is an aspect of constitutionalism that prevented from hegemonic control of power and
tyranny
 Opponents of the right to secession
o It encourages fragmentation
o It is a time bomb which dis integrate Ethiopia
o It should not be given as a right
 The unconventional constitutional interpretation through the Upper House of the
federal legislature/House of Federation/
 HoF is a legislature Art.53 says “there shall be two federal Houses”
 Art. 62 the HoF( with the help of CCI) is interpret the constitution
 Justifications : it is the home of NNPs so, it deserves the power
It is not only legal document but also political
 Critics: the legislature should not be an interpreter the House lacks expertise
 The non-representation of states in the Upper House
 The HoF is composed of NNPs (Art. 61.1) so, it is the representative of ethno-
cultural groups rather than states
 Remedy? Regional presidents are members
Ethnic groups may indirectly represent their host states
Members came from each state council
 The Upper House has no or little law making role
There are only two matters which are relating to legislation.
 Art. 62(7) determination of division of revenue derived from joint federal and state tax
sources
 Art. 62(8) determination of civil matter which require the enactment of laws by HPR
These are not even legislative matters they rather are directions on what to legislate up on it.

41
 4.3. Division of powers
Forms of Power Division in federal State
It is a well-known fact that federations divide power constitutionally between the federal government
& the states related to political (legislative, executive and judicial) and financial functions. In doing
so, some state functions are so sensitive and they require maintaining uniformity across a nation.
Hence, the national government usually handles such powers. The essence of a federal system itself
dictates for the federal government to handle those areas conceived to be common concerns of the
federated units and the states to exercise those powers that would enable them to express their
regional identity. Therefore three main sets of power can be identified in dividing power between
federal governments & regions;
a) Exclusive Power
Exclusive power refers to that power which a federal constitution exceptionally provides to either
level of government (the federal or state governments). In this case, the constitution may allow
monopoly of some powers to one level of government and the rest may be left to the other level or as
a common jurisdiction between the two. However, in reality exclusive power is usually given to
federal governments because there are some functions and powers that should be exceptionally
exercised by it because they require uniform application over the entire territory and equally to all
citizens. For example in USA, the power, which is neither allocated to the federal government nor
prohibited for states, is given to the states. The same is almost true for Germany and Switzerland.
However, the Indian constitution confers exclusive power for both federal government & the states.
The same process in FDRE constitution too.
b) Concurrent Power
Is a common jurisdiction between the federal government and the states. Certain matters cannot be
exclusively left to either level of government. Overlap of jurisdictions is inevitable in federal systems
because demarcating a clear boarder between those powers that specifically belongs to the federal
government and states is difficult for different reasons. Regional governments usually exercise
concurrent powers until the federal government intervenes and legislates on it when it became a
matter of vital federal importance. Intervention from the federal government is desirable in some
cases to secure uniformity since; separate legislation by states may result in nation wide disparity in
some areas.

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 c) Residual Power
Include powers not exhaustively listed in a constitution and assigned either to the federal or state
governments. In systems where such powers are given to the regional states (which usually apply to
most federations), it allows regions to entertain their diversity and express their identit y as it may
allow independent exercise of power by them. In USA powers, not specifically listed as federal
affairs & not prohibited for states to exercise, belongs to states. The same is true for Ethiopia,
Switzerland and Germany. However, in India residual power is granted to the Federal government.
Each level of governments have exhaustive list of power provided by the constitution and concurrent
power as a common jurisdiction. The scope of residual power and its importance is dependent up on
the extent to which exclusive powers are listed exhaustively. As it might tell, the broader the list of
exclusive power the narrower the scope of residual power.
4.4. The Adjudication of Disputes and Intergovernmental Relations /IGR/ in Ethiopia
IGR is a forum for bargaining with the federal government on matters of common interest and of
conducted based on some sense of partnership b/n the two governments. And in a long run it meant to
be a forum of attainment of common goals through cooperation IGR has both vertical as well as
horizontal dimensions: Vertical- fed govt with States and locals. Horizontal- states with states. The
presence of concurrent powers and watertight/ unclear/ demarcation of exclusive powers needs IGR
to accomplish task without disputes.
4.4.1. The House of Federation
The house of the federation (the upper house) is a representative organ whose members are
representative of each nations, nationalities and peoples. The house is the house of nationalities
elected for five years term. How much representative shall a nationality group have is specified by the
constitution. Each nationality would be represented at least by one member, but the provision favored
large ethnic groups to have more representation when it decided that for each one million additional
population of an ethnic group one more representative will be allocated. These members can be
elected either directly by the people or indirectly by the state council.

With regard to the power of this house, its core function is constitutional interpretation. The Ultimate
authority to interpret the constitution is left to this organ (article 62). To this effect the house is given
the power to organize Commission of Constitutional Inquiry (CCI). The CCI examines any case of
constitutional interpretation and if there is a need it will submit the case to the house, which passes
final decision on the issue. The CCI is composed of three members of the house, six legal experts and

43
the president and the vice president of the Supreme Court (article 82). Another power entrusted to the
upper house is the management of relationships among regional states. Accordingly it maintains
equality of all nationalities and finds solutions to problems and misunderstanding arose between
them. In addition the issues of self-determination of nationalities up to and including secession are
determined to be handled by the same house (article 62).

The house has entrusted financial function of partitioning funds between the federal and state
governments on revenues derived from join tax sources. It additionally decides on the amount of
subsidy the federal government provides to the states. Given that it is allowed to exercise such
powers, the house of federation plays no role in the law making process. As compared with the upper
house in some countries like the senate in US, it cannot share power in some important areas with the
lower house (HoPR). Generally, we can conclude that the federal state arrangement under the 1995
constitution was a new phenomenon in the political history of the country. By designing such federal
arrangement the country has shown a significant departure from the past, where by the state was
under the command of strong unitary regimes irrespective of the multi-national nature of the entire
population.
4.4.2. Other Institutions/ Instruments/ for IGR in Ethiopia
The FDRE constitution offers little guidance on the presence of IGR b/n federal and regional states (
Art.48, Art. 50.8, Art. 62.4, Art. 62.6,Art.62.7). Practically there are at least three ways to facilitate
the enforcement of joint programs and federal laws and policies namely: the Kilil Guday Zerf/
Office of Regional Affairs/, party structure and process of policy making
A. IGR through Executive Institutions
Formerly, the office of regional affairs is established to assist emerging regions. In 2001 it is named
as Ministry of Federal Affairs and had got legal background by proclamation no. 256/2001 which
stipiulated the most relevant powers of the institution. Art. 11b ‖without prejudice to provisions
Art.48 and 62(6) of the fed govt, facilitates the resolution of miss-understandings arising b/n regions‖
c. ―give assistance to the regions with particular emphasis on less developed ones‖ In 2005, MoFA
scored significant development by proc.no.471/2005 the two functions remained intact, it provides
one provision which is missing in the previous proclamations i.e. ―to cooperate with concerned
federal and regional state organs in maintaining public order; serve as a focal point in creating good
federal –relationships and cooperation based on mutual understanding and partnership and thereby

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strengthen the federal system ‖. After 2018, ministry of federal and pastoralist affairs replaced by
ministry of peace and currently, ministry of peace serves as IGR.
1. IGR through Party Channel
Party channel is important mechanism for settling IG disputes and integrating policies. Currently,
Ethiopia is ruled by coalition and affiliate parties – easy to interact. Limitation is what if one
opposition party holds power in one regional state?
2. IGR through policy making: many polices drafted by the federal government touches power
give to the states like primary education. What is its implications regarding this?
4.5.Challenges and Prospects
The requisite balance between the forces of unity and diversity, the combination of national self-
determination and federalism, the dilemma in creating constituent states that coincide with nationalities and
the relation between individual and collective rights are cases in point.
• Extreme interstate imbalance/Asymmetry/
• Minority right protection
• Boundary disputes, quest for additional land, and identity
• Lack of Grassroots democracy and Good governance
• The threat of secession and fragmentation
• Bad beginning of EPRDF unresponsive strategies
• Hierarchical and authoritarian political culture
• Hate politics and extremism

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