A federation can be formed by independent, sovereign entities coming together (e.g., the USA, Switzerland, and Australia). These are sometimes called “coming together” federations. In other cases, federations are formed by changing the structure of a country that used to be a unitary and centralized state (e.g., Nigeria, Spain, India). These are often called “holding-together” federations.

Coming together federations are usually created for the following reasons:

• Managing the administration of countries with large territories.

• Creating greater capacity for self-defense and national security.

• Promoting economic development by creating a larger unit for market and trade.

• Increasing collective power in foreign relations.

• Enhancing democracy by fostering greater participation and responsiveness.

Holding-Together federations are usually formed to deal with diversity (particularly differences of ethnicity, language, and religion) in a territory. They usually involve giving a measure of self-government to minority communities that are dominant in different parts of the country. This type of a federal system aims to provide protection for the culture, language or religion of minorities and responds better to the special circumstances and needs of these communities. Holding together federations aim to maintain the unity of a country by giving more autonomy to minorities or regions in order to avoid fragmentation or conflict.

Holding-together federations are more common in countries that have experienced ethnic or regional conflict, or the historical marginalization of one or more minorities. Federalism has been adopted in post-conflict environments in Bosnia, the Democratic Republic of Congo, Iraq, Sudan, and South Africa, and is being considered in Sri Lanka and Nepal.

As a result, these countries face several challenges in creating a federal system, that were not as serious in coming-together Federations. The division of powers between central and regional government requires all groups to agree on a system of separated and shared powers. In these circumstances, groups (including ethnic and regional parties) can be unwilling to give concessions that they feel go against their vital interests. For these reasons, trust, and compromise between regional and national actors (including political parties) are pre-requisites of a federal system.

Forming Federal Systems

In general, there have been fewer challenges in creating coming-together federations than there are for holding-together federations. Coming-together federation has been generally based on the consent of entities that recognize the advantages of coming together. Furthermore, because the federal units who decided to come together were previously independent states, they already possessed established political systems. The only institutions that needed to be created were on the federal/national level.

Holding-together federations, on the other hand, is often not as easy because there are often groups that have an interest in maintaining centralized state power. These groups may resist federalization. On the other side, minority groups who are demanding regional autonomy may be prepared to use violence in order to achieve their aims. The mutual benefit for forming a state is not as clear as in “coming together” federations. “Holding-together” federations are also more difficult to establish for two reasons:

1. Many difficult decisions have to be taken while designing the system. These decisions relate to controversial issues such as the distribution of power and can be hard to make in situations where the level of trust between different groups is low.

2. Several governments have to be created in the new federal units. This can present challenges for regions that may have previously not had the capacities or experience to make decisions or implement policies. Creating the institutions for both the national and regional at the same time can be a great challenge.