Who's afraid of federalism?
When politicians agonise over obstacles to federalism, it is usually over the arithmetic of political bureaucracy. Little attention has gone into economic bureaucracy for federalism. Politicians tend to see entrepreneurs as financiers than as beneficiaries, which needs to change if the Nepali economy is to make a smooth transition throughout the political reform.
Economic policies should be well articulated if the State is to ensure that distribution of entrepreneurial resources is equitable across the regions. For example, what is to happen of the entire world of tax and business regulations? What is the premise for the checks and balances between the centre and the regions when it comes to industrial administration? How is one to ensure that nodes of the essential supply chains are not paralysed by regional power politics? Most importantly, how is one to make sure that the complicated saga of energy politics and cross-border connectivity are not further entangled after federalisation? The iceberg is weighed down by endless questions.
In the United States, capitalism was the core of its federalisation process. In Canada and in Switzerland, it was the cultural autonomy which paved way for federalism. Regardless of these differences, history showed that good federal systems are those which regenerate enough resources for its people. Experiences from around the world tell us of the blunders to avoid. Funneling high taxes out of enterprises might be a temptation for new regional bureaucracies, especially if the going gets tough, but this will be like plucking feathers of a golden goose. Politicians often compromise on business enabling environment as they set out to engineer their power constellations. Especially, showdowns of political egos at regional borders run the risk of disrupting the supplies of inputs and outputs. If these monsters capture the governance, home-grown business will shut down and foreign investors will fly away.
It is one thing to say that misallocation of economic opportunities across the regions should be corrected, but it takes a bigger vision and more serious determination to say that federalism should unlock the economic potentials inherent in all regions. The latter is what Nepal should aim for if federalism is to truly and meaningfully revolutionise. There are plenty of symbolic and material resources that have gone wasted for centuries because of Kathmandu-centrism. Federalism should bring solutions to this problem, and aim to build regional platforms on which to cultivate unconventional ideas, build new visions, and explore new economic frontiers. These may come in the form of utilisation of regional landscapes for luxury tourism, regional craftsmanship for sophisticated global consumption, global discourse on regional histories, arts, and cultures etc. Nepal is already known in the world for its diverse climate, terrain, histories and cultures. The challenge is now to build a nation state that can see the potentials and capitalise on these symbolic resources without marginalising the very people who embody these symbols. The hundred flowers will bloom only if the state –be it central or regional – ceases to be a controller and learns to be a facilitator.
