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1 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS THE PUBLIC POLICY FORUM Striving for Excellence in Government The Public Policy Forum is an independent, non-profit organization aimed at improving the quality of government in Canada through better dialogue between the public, private and voluntary sectors. The Forum’s members, drawn from businesses, federal, and provincial governments, the voluntary sector and the labour movement, share a common belief that an efficient and effective public service is a key element in ensuring our quality of life and global competitive position. Established in 1987, the Public Policy Forum has gained a reputation as a trusted, neutral facilitator, capable of bringing together a wide range of stakeholders in productive dialogue. Its research program provides a neutral base to inform collective decision making. By promoting more information sharing and greater linkages between governments and other sectors, the Public Policy Forum ensures that Canada’s future directions become more dynamic, coordinated and responsive to the challenges and opportunities that lie before us. The Public Policy Forum’s two year strategic plan identifies Building Better Government as its overarching objective and within that objective specifies Prosperity as a key theme. One of the primary roles of government is to ensure that the necessary conditions for prosperity are in place which includes ensuring the active participation by all citizens, to the best of their potential. Public Policy Forum/ Forum des politiques publiques 1405-130 Albert Street Ottawa, ON K1P 5G4 Tel.: (613) 238-7160 Fax: (613)238-7990 www.ppforum.ca

2 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS ABOUT THE AUTHOR Gordon Shanks, PhD Gordon Shanks is Executive in Residence at the Public Policy Forum. He is at the PPF on an interchange assignment from Indian and Northern Affairs Canada (INAC) where he was most recently Senior Assistant Deputy Minister, Regional Operations Support and Services. At the Public Policy Forum, Mr. Shanks leads the research program in Aboriginal policy with emphasis on enhancing the level and quality of Aboriginal participation in the Canadian economy. In addition, he participates in other Forum projects aimed at improving the quality of government in Canada. Gordon has been a federal public servant for the past twenty-five years with a wide range of experience in inter-governmental relations, economic development, program administration and evaluation, aboriginal policy, and senior management providing advice to Deputy Ministers and Ministers. Mr. Shanks is a seasoned negotiator, having served as Director-General, Comprehensive Claims, INAC as well as having spent a number of years in the Office of Aboriginal Constitutional Affairs, PCO where he was engaged in negotiations with a variety of Aboriginal groups on constitutional rights. He has extensive experience in dealing with provincial and municipal governments and understands the complex jurisdictional landscape surrounding Aboriginal issues. He is a respected interlocutor with Aboriginal groups able to engage political leaders as well as officials in constructive dialogue leading to positive solutions. Gordon was supported in this project by Patrick Kirby, Research Assistant. Logistical assistance for the project was provided by Kelly Cyr, Senior Project Assistant.

3 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS

TABLE OF CONTENTS EXECUTIVE SUMMARY 4 PREFACE 7 METHODOLOGY 8 KEY MESSAGES AND COMMON CONCERNS 9 DETAILED INTERVIEW FINDINGS 11 CULTURE OF DEPENDENCY 11 PLANNING 12 LAND MANAGEMENT 13 EQUITY 14 ACCESS TO CAPITAL 15 BUSINESS MANAGEMENT 16 JOB TRAINING 17 ECONOMIC INFRASTRUCTURE 18 FIRST NATIONS CULTURE 18 CONCLUSIONS 20

4 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS EXECUTIVE SUMMARY The extent to which First Nations communities and individuals are actively participating in Canadian economic life to the best of their potential is a serious public policy question. Recent work comparing a Human Development Index (HDI) for Canadians as a whole with the Registered Indian population shows a significant gap between these two populations. The research determines that, while the disparity in HDI scores in the twenty years between 1981 and 2001 seems to have decreased, Registered Indians continue to have shorter life expectancy, lower educational attainment, and lower average annual incomes than do other Canadians, and the gap in average annual incomes actually increased during this period. Within these gaps, First Nations people living on reserves consistently exhibit the worst outcomes. While the HDI gap may be closing, it can be argued that it is closing far too slowly. The public sector, both federal and provincial, has invested heavily in First Nations but it is not clear why a dramatic improvement in socio-economic conditions remains so elusive. Are public policies focussed on the right issues and if so, can they be enhanced to achieve higher levels of success? Are there specific issues that could be addressed through filling policy or program gaps? Can these be specified more clearly to develop an action plan to achieve better and timelier outcomes? This study presents a high level overview of the First Nations on-reserve economic development landscape. It reports on the findings of interviews conducted with experienced and knowledgeable stakeholders. The most important and perhaps the most obvious observation of this overview is that the economic development issues facing First Nations are extremely diverse and very complex. This leads to the conclusion that any public policy or program response will have to be tailored to fit a variety of circumstances. First Nations are at various stages in terms of capacity to plan for and seek appropriate economic activity or to take advantage of economic activity that comes their way. This is truly a case where one size will not fit all. The reasons why most First Nations find themselves in a quagmire of under-performing or virtually non-existent economies is a complex mix of historic circumstance, purposeful public policy and social dynamics. The solutions, in most cases, are not obvious and returning to any modicum of economic prosperity for the vast majority of First Nations will be difficult and time consuming. Public policy-makers will need to demonstrate an uncharacteristic patience for results from any efforts that they may put forward toward durable solutions. Equally so, private sector participants need to put even more effort into understanding the unusual and sometimes unique circumstances of First Nations and continue to develop means of embracing these challenges.

5 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS But even though the economic development landscape for First Nations is complex, it is far from bleak. The interviews clearly point to an emerging spirit of optimism and commitment within First Nations to discard the shackles of dependency and return to a culture of self sufficiency. There are important messages for government in terms of how to support the emerging First Nations economy. It is critical and urgent to put in place the legal underpinnings for modern governance structures within First Nations. For economic development to take hold and succeed requires stable and accountable government. First Nations have generally had to contend with substantial instability and uncertainty in terms of political direction and actions. There is a desperate need for mechanisms to support a culture of political accountability which will institutionalize trust in government to act in the public interest. Governments need to act in a more cohesive manner, both inter-governmentally and intra-governmentally. There are numerous examples of either competing or complementary programs that are very difficult to access for a variety of reasons. There are strong suggestions that programs need to be re-designed according to identified needs and administered with an eye to client needs. Now is not the time to be fixated on clawing back program funds as own source revenues become available through business profits. Any economic development successes in First Nations are fragile at best and First Nations enterprises, whether band-owned or privately-owned, need incentives to prosper and re-invest in the First Nations economy. There is great concern that any benefits from economic development efforts will be cancelled out through reductions in transfer payments. The availability of, use, tenure and jurisdiction over land is at the heart of economic development. There exists an incredibly high level of frustration over the timeframe and processes involved in land designations and additions to reserve. Certainty of tenure is fundamental to the concept of using equity in land as a component of economic development. Efforts to clarify tenure and modernize the current system of land registration, although difficult to achieve, are necessary. Attention needs to be paid to rapidly expanding the application of the First Nations Land Management Act as well as finding immediate relief from the strictures of current practices under the Indian Act. The availability or absence of infrastructure is a critical component in determining the potential for economic success. Many First Nations communities are located in remote areas where economic opportunities are or could be linked to natural resource development. It is expected that both the federal and provincial governments will contribute, along with private sector developers, to the infrastructure needed to realize the potential of natural resource development. But it is also clear that many First Nations will remain physically inaccessible and for them fully functional electronic infrastructure is a sine qua non if they are to participate in the 21st century economy.

6 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS There are many suggestions for the way forward. All stakeholders, including the private sector and governments (federal, provincial, municipal, First Nations) can take these promising directions and suggestions and drill down to articulate much more precisely how they might be developed further and implemented. They need to be tested from the perspective of the reality that most First Nations live. Serious effort should be undertaken to engage First Nations in defining success. What is it that First Nations are looking for in terms of economic development? There is a long series of questions to be asked but there has to be a concrete and common understanding as to what constitutes success and what measures will be tracked to determine whether the desired results are being achieved. What is to be achieved needs to be coupled with how it is to be achieved. This study demonstrates that there is a strong desire to get out from under the smothering culture of dependency to a positive, future-oriented culture of self-sufficiency. Public policy solutions need to recognize the strength of the First Nations desire to be full participants in directing the course of their own destiny. Governments at all levels must resist the long-standing urges to impose paternalistic solutions. Governments must find ways to break the “fiduciary grid-lock” to constructively engage and share risks with First Nations as partners. For economic development to take hold, this research suggests that First Nations need a new institutional paradigm that removes the burden of virtual complete responsibility for the First Nations economy from Chief and Councils to one where First Nation governments establish the parameters for supporting economic activity within their territories and nourish the emerging spirit of entrepreneurship.

7 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS PREFACE The extent to which First Nations communities and individuals are actively participating in Canadian economic life to the best of their potential is a serious public policy question. Recent work by researchers at Indian and Northern Affairs Canada that compares a Human Development Index (HDI) for Canadians as a whole with the Registered Indian population shows a significant gap between these two populations. The research determines that, while the disparity in HDI scores in the twenty years between 1981 and 2001 seems to have decreased, Registered Indians continue to have shorter life expectancy, lower educational attainment, and lower average annual incomes than do other Canadians, and the gap in average annual incomes actually increased during this period. Within these gaps, First Nations people living on reserves consistently exhibit the worst outcomes. While the HDI gap may be closing, it can be argued that it is closing far too slowly. The public sector, both federal and provincial, has invested heavily in First Nations but it is not clear why a dramatic improvement in socio-economic conditions remains so elusive. Are public policies focussed on the right issues and if so, can they be enhanced to achieve higher levels of success? Are there specific issues that could be addressed through filling policy or program gaps? Can these be specified more clearly to develop an action plan to achieve better and timelier outcomes? The frustrations of the marketplace and the public sector over their collective inability to fully energize First Nations economic development must be considered in the context of the First Nations’ view of economic development. For First Nations, economic development is a complex concept, intimately tied into the maintenance of cultural and territorial integrity, self determination, self reliance, creation of communal wealth, internal governance including accountability, self government, and entrenchment of government-to-government relations with municipal, provincial and federal governments. This suggests that promoting economic development in First Nations may be a more complicated task than public policy makers have envisioned to date. In addition to uncovering and effectively dealing with the issues limiting the operation of the market forces that drive the rest of the economy, diagnosing First Nations economic development necessarily involves examining the economic aspirations of First Nations. This means understanding the culturally defined definitions of success, the modalities of development that will most effectively achieve these successes and the means to put those modalities in place.

8 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS METHODOLOGY The purpose of this study is to provide a high level overview of the economic development landscape. It is not a definitive or exhaustive treatment of the topic but rather is intended to provide a flavour of what those involved in First Nations economic development perceive to be the current issues. While the focus of the research is on identifying issues, invariably any discussion of issues leads to suggestions as to how these barriers might be overcome. Accordingly, the description of the economic development landscape does offer some suggestions that could be pursued in the search for solutions. The study methodology is to interview experienced and knowledgeable individuals as to the important factors contributing to economic development successes and failures in First Nations. Participants were selected from the following groups: First Nations political leaders, First Nations entrepreneurs, Economic Development Officers, and representatives of financial institutions that are involved in lending to First Nations businesses. The research for this report was conducted during October and November, 2004. The Public Policy Forum asked twenty key stakeholders to respond to a series of questions that explore the following issues as they relate to the economic opportunities of Aboriginals:

• Business planning • Management capacity • Economic infrastructure • Local development process • Access to capital and equity considerations • Labour force/Job training • On-Reserve Issues/Impact of the Indian Act • Use of government programs • Cultural considerations

9 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS KEY MESSAGES AND COMMON CONCERNS The most important and perhaps the most obvious observation of this overview is that the economic development issues facing First Nations are extremely diverse and very complex. This leads to the conclusion that any public policy or program response will have to be tailored to fit a variety of circumstances. First Nations are at various stages in terms of capacity to plan for and seek appropriate economic activity or to take advantage of economic activity that comes their way. This is truly a case where one size will not fit all. There is great frustration evident amongst First Nation stakeholders over what they perceive to be a government culture that is so focussed on what programs cost as opposed to understanding the benefits of public expenditures. There is a widely held view amongst stakeholders that public money put into First Nations economic development ought to be thought of in investment terms. There is a strong belief that investments will pay high rates of return in generating wealth for public services, producing jobs, alleviating social pathologies, and re-establishing self-esteem and self-sufficiency in this segment of Canadian society. Within First Nations society the Indian Act is omnipresent. While its effects are probably impossible to fully document, it is safe to say that its impact on First Nations economic development has reached mythical proportions. Some find its existence so overwhelming that economic development is not even attempted, while others recognize it as out of date and out of touch with modern realities and look for ways to work around its anachronistic requirements. Suffice it to say, any discussion of First Nations economic development will start with and constantly return to understanding and trying to work with this invasive legislation. While there may be some barriers facing First Nations and other Aboriginal entrepreneurs off-reserve, the Indian Act is such a pervasive and consuming feature of on-reserve activity that on-reserve economic development cannot be usefully lumped into a category of Aboriginal economic development. First Nations on-reserve economic development challenges are distinct and need specific consideration. The reasons why most First Nations find themselves in a quagmire of under-performing or virtually non-existent economies is a complex mixture of historic circumstance, purposeful public policy and social dynamics. The solutions, in most cases, are not obvious and returning to any modicum of economic prosperity for the vast majority of First Nations will be difficult and time consuming. Public policy-makers will need to demonstrate an uncharacteristic patience for results from any efforts that may be put forward. The findings of this study suggest that governments may have too quickly or easily abandoned policies or programs that could have been important in creating structural change.

10 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS Equally so, private sector participants need to put even more effort into understanding the unusual and sometimes unique circumstances of First Nations and continue to develop means of embracing these challenges. Success on a significant scale will likely be achieved in an uneven fashion with as many failures as successes. It will be important to evaluate and learn from failures as well as from successes. But even though the economic development landscape for First Nations is complex, it is far from bleak. There are important changes taking place amongst First Nations all across Canada which provide cause for great hope. The interviews clearly point to an emerging spirit of optimism and commitment within First Nations to discard the shackles of dependency and return to a culture of self sufficiency. Beyond the call for perseverance and patience, there are important additional messages for government in terms of how to support the emerging First Nations economy. Firstly, it is critical and urgent to put in place the legal underpinnings for modern governance structures within First Nations. For economic development to take hold and succeed requires stable and accountable government. First Nations have generally had to contend with substantial instability and uncertainty in terms of political direction and actions. There is a desperate need for mechanisms to support a culture of political accountability which will institutionalize trust in government to act in the public interest. While this is true of all governments, it is especially important in First Nations where most assets are held in common. Secondly, governments need to act in a more cohesive manner, both inter and intra-governmentally. There are numerous examples of either competing or complementary programs that are very difficult to access for a variety of reasons. There are strong suggestions that programs need to be re-designed according to identified needs and administered with an eye to client needs. In economic development time is often in very short supply and government programs have to find a way to support First Nations at the speed of business. Consideration should be given to using alternative delivery mechanisms including using private sector institutions. Thirdly, now is not the time to be fixated on clawing back program funds as own source revenues become available through business profits. Any economic development successes in First Nations are fragile at best and First Nations enterprises, whether band-owned or privately-owned, need incentives to prosper and re-invest in the First Nations economy. There is great concern that any benefits from economic development efforts will be cancelled out through reductions in transfer payments. A carrots rather than sticks policy will produce more constructive results. Fourthly, the availability of, use, tenure and jurisdiction over land lie at the heart of economic development. There exists an incredibly high level of frustration over the

11 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS timeframes and processes involved in land designations and additions to reserve. Certainty of tenure is fundamental to the concept of using equity in land as a component of economic development. Efforts to clarify tenure and modernize the current system of land registration, although difficult to achieve, are necessary. Attention needs to be paid to rapidly expanding the application of the First Nations Land Management Act as well as finding immediate relief from the strictures of current practices under the Indian Act. Lastly, the availability or absence of economic infrastructure is a critical component in determining the potential for economic success. Many First Nations communities are located in remote areas where economic opportunities are or could be linked to natural resource development. It is expected that both the federal and provincial governments will contribute, along with the private sector developers, to the infrastructure needed to realize the potential of natural resource development. But it is also clear that many First Nations will remain physically inaccessible and for them, fully functional electronic infrastructure is a sine qua non if they are to participate in the 21st century economy. DETAILED INTERVIEW FINDINGS 1. Culture of Dependency Virtually all of those interviewed described the major barrier to achieving greater levels of economic development in First Nations today is the existence of a pervasive sense of dependency. This was described as being like a communal inferiority complex. It appears to manifest itself as an attitude of waiting for rather than seeking opportunity. This is not a study in social psychology and the interviewees did not claim any professional credentials in this regard but it was such a strong response that it is necessary to try and describe this complex sociological phenomenon. Part of the explanation seems to be that entrepreneurship as a lifestyle has been stifled in First Nations. This was described as “fiduciary freeze” whereby First Nations people have been conditioned to expect a cheque with no reciprocal expectation of effort. As a consequence, businesses suffer from a lack of understanding as to the amount of effort that has to go into creating a successful and sustainable business. This is applicable to both managers and employees. It is reported that in many First Nations young people often do not have a strong sense of a future where they believe that they can achieve their dreams. This was described as “why is it that non-Aboriginal children think in terms of being whatever they want to be and Aboriginal children do not?” Juxtaposed with this observation of dependency is an emerging and growing reaction against it. There are a number of First Nations where economic development is occurring and taking hold. The political leaders, business leaders, and administrators appear to have taken a conscious decision to overcome the negativism and sense of entitlement within

12 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS their communities. This has been described as refusing any longer to be victims and they have decided instead to take charge of their own future. First Nations that have achieved economic success point out that they have created a culture of striving for excellence within their administrations which extends to any businesses with which they are involved. This is described as a shift from simply making an effort to a drive to achieving results. Within these communities there is recognition of a role for the private sector within First Nations. The First Nations government sees its role as supportive of private enterprise rather than as a competitor. In these instances, the First Nation administration considers what business lines are best undertaken by a First Nation owned company (the First Nations equivalent of a Crown corporation) and which ones can be more effectively pursued by the private sector. This encourages entrepreneurship but it also exposes the need for business services for private business which normally the First Nation does not have the capacity to provide. Many of the interviewees noted the emergence of entrepreneurship within First Nations but stressed that it is fragile and requires support. Of particular interest is the idea of demonstrating to young people the rudiments of business development and encouraging them to become entrepreneurs. It was suggested that programs such as Junior Achievement could yield significant benefits in terms of capturing the imagination and energy of young people by giving them the vision and tools to succeed in business. The use of role models was pointed to as an important means of demonstrating to all potential entrepreneurs, whether young or not, that First Nations people do have the ability and can learn how to become successful entrepreneurs. 2. Planning Fundamental to economic development success is planning. Invariably, those involved in successful business ventures indicated the importance of understanding the economic environment in which they live and planning for activities that fit with regional and local economic realities, as well as their own objectives and capacities. Time and again, it was stressed that planning needs to be concrete and focussed both in terms of time and resources. This being said, however, what appears to be abundantly clear is that most First Nations do not engage in economic development or business planning. They tend to be largely reactive to opportunities that may present themselves. As a consequence, they are usually not well-positioned to realize any benefits from real opportunities, much less maximize potential opportunities for lack of trained management or workers or means of accessing necessary capital. Lack of planning means that First Nations scramble to respond to potential opportunities. As a result, generally they are not able to put together solid business proposals within the timeframes demanded by the marketplace.

13 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS One of the significant benefits of a planning process is the engagement of the membership of a First Nation in defining an economic vision for their community and region. A key risk currently faced by First Nations entrepreneurs is the rejection by community members of specific proposals, often after a great deal of expense and effort has been expended. An economic development planning process that involves serious analysis and review of opportunities within the context of a community vision is an important means of enhancing the economic development environment in a First Nation. This was described with the phrase “go slow to go fast”. It was noted by interviewees that planning processes are sometimes viewed as time consuming and theoretical but were vigorously defended as an important means of reaching community consensus that would sustain a stable First Nation vision through political leadership transitions. It is clear that economic development plans are long term and to be useful cannot be connected to the timeframes of political mandates. There are a variety of reasons given as to why First Nations do not plan. The most common is that they simply do not have the resources, either human or financial. For many First Nations planning is not a priority and they do not recognize its importance for economic success (often until it is too late and real opportunities are missed). Many of the interviewees stated that First Nations do not have any unused capacity within their administrations to undertake planning functions either in terms of economic development generally or specific business planning. It was argued that neither of these functions can be factored into project financing and as a result there exists a huge gap in the support structure. There was a strong consensus that a government program supporting a serious planning function would pay large dividends to First Nations. While this study concentrated on the economic development aspects of planning, further investigation may well support the concept of First Nation community planning involving related social and physical needs. Creating a community vision and the means to implement this vision would invariably require consideration of these other factors. One means of ensuring that economic development plans are serious efforts supported by the First Nation is to restrict application of discretionary programs to those First Nations that have a plan in place. 3. Land Management Use and management of land is central to virtually all forms of economic development. It is clear from this study that most First Nations economic development practitioners believe that the current paradigm for land management needs to be up-dated on an urgent basis. Time and again interviewees stated that the current system is too ponderous, overly complicated, and fraught with uncertainty. There is virtual unanimity that the land designation process as currently practiced is seriously flawed. Particular reference is made to the inability of federal actors to understand the business objectives and imperatives of First Nations and work together to develop an appropriate risk

14 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS management model. This was described as “fiduciary grid-lock” where the Crown appears to have a zero risk tolerance. The result of the observed deficiencies is that First Nations find themselves unable to “move at the speed of business” and often suffer the consequence of losing economic opportunities. Closely related to land management is the issue of land tenure. In most business arrangements, land is central to creating certainty and is very often an important component of equity. The ability to describe the land being used and to verify with a high degree of certainty the precise legal nature of the land holding is an important concept. This is often lacking in First Nations. It is suggested that creating a modern tenure and land description system, coupled with an efficient land registry, would be an area for immediate investigation as an improvement supportive of economic development. 4. Equity Simply put, most First Nations, both communities and individuals, are poor. They live the flip-side of the saying “it takes money to make money”. They have difficulty amassing equity to participate in economic development opportunities. It is reported that there is a low rate of savings amongst First Nations individuals so that any wealth currently generated is not available as equity. There are few mechanisms currently available to First Nation governments to capture and redistribute wealth generated within First Nations. Consequently, the First Nations public sector is generally not a source of business equity. The one exception to the idea that First Nations do not have equity relates to those First Nations with monies held in trust in the Consolidated Revenue Fund. This research suggests that the federal government could usefully review its policies and procedures regarding how and for what purposes First Nations can access their money. As with the land management regime, First Nations complain that the current process is overly bureaucratic and risk averse. Financial institutions state that equity starts with the land. As noted above, creating certainty of land tenure is often a key aspect in a business venture. Equally so, the value of land can be an important source of equity in a business deal. An area for policy analysis is that of looking for ways that would allow First Nations to access their equity in land. This would require defining ways of land valuation and appropriate mechanisms for encumbering land as security. The conclusion of virtually all key stakeholders interviewed was that there is an equity gap facing First Nations entrepreneurs, both public and private sector and that government programs are a necessary component to bridge this gap. The interview data clearly support a continuation of equity programs but this is where the consensus ends. There is a wide range of views of what these programs should entail, how they should be implemented, and by what institutional means.

15 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS What is clear is that the equity programs need a fundamental re-think. The perception is that current programs are designed from the viewpoint of a program administrator rather than from the viewpoint of First Nations business needs. There are a myriad of suggestions of what might work but there seems to a fairly widely held view that careful thought should be given as to whether grants or contributions should be continued. There is a sense that “free” money contributes to the sense of entitlement and in some sense may reduce the drive to succeed. This was summed up in the phrase “equity programs have to be designed so that they are used as equity, not as a subsidy”. 5. Access to Capital Closely related to the issue of equity is the question of First Nations access to capital. The interview data is unequivocal in demonstrating that First Nations attempting to develop business opportunities on-reserve face significant barriers in accessing financial resources. There is a consensus amongst First Nations that there exists a strong anti-reserve bias within the mainstream business community. A variety of anecdotes were provided along the lines that an on-reserve business proposition could have met all of the standard requirements for financing only to be rejected at the last minute because of a view that the on-reserve business represents a less desirable opportunity than an off-reserve alternative. Almost invariably this reluctance is laid at the feet of lawyers who are unfamiliar with First Nations and appear to be used as business advisors confusing legal and business risks. This sort of problem, it is suggested by interviewees, requires a strong and on-going effort at education amongst the various potential players including the financial and legal communities, as well as government officials who are involved in the capacity as fiduciaries. Part of the issue surrounding access to capital is working with the financial community. Financial institutions report that most small business loans are essentially evaluated by straight formula. If the track record or credit rating of an applicant is poor, credit rejection is virtually automatic. For those that make it into the assessment queue, a First Nations on-reserve application normally takes at least twice as long to process as a non-First Nation application. This sort of time delay can often prove fatal to a potential business opportunity. There is evidence that the major financial institutions are making efforts to work with First Nations, particularly on the larger scale projects. Almost all of them have established divisions that specialize in aboriginal business and the interviews suggest things are going in the right direction. But having said this, there still remains a healthy degree of scepticism as to whether this is more apparent than real. First Nations business people point out that local lending officers are still very conservative in their assessments of risk and often do not appear to be as flexible or creative as their head office spokespersons would indicate they are or ought to be.

16 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS Collateral remains a big issue for accessing capital. There is evidence that financial institutions are making serious attempts to be creative. Techniques such as conditional sales contracts and leasing are being used to some extent. This is a positive signal, but it would appear that more policy work on the part of the private sector would be beneficial in this regard. Incorporation of businesses as a means of limiting liability does not appear to be a popular solution but again it would appear that more thought should be given to this and related private institutional solutions. The question of using program funds as collateral for accessing capital was raised. It is clear from the interview data that this is a complex subject but one that would appear in need of further discussion. The role of Aboriginal Credit Corporations (ACCs) is well established amongst the First Nations business community and there appears to be solid support for the work they are doing in providing capital to on-reserve businesses. There is also a view that the ACCs could do much more if they had more capital at their disposal. They fill a niche that the major financial institutions do not and will not fill. Interesting follow-up work could be in the area of documenting the economic activity created through ACC support to establish the metrics of the investment model. In this way governments could determine the rate of social return through this sort of financing instrument. The lack of venture capital was mentioned numerous times as a deficiency in the area of access to capital. There are some First Nations venture capital funds in their infancy now but it will be some time before their impact can be assessed. Beyond the idea of true venture capital where opportunities need to generate in the order of twenty-five percent annual returns, there is an identified need for long-term patient capital. It has been suggested that it would be worthwhile to consider establishing an arms-length institution that would have a capital base and function as a venture/patient capitalist for First Nations economic opportunities. This is essentially the model being used in Australia to support aboriginal economic enterprises. Other ideas include the establishment of a First Nations investment tax credit. It is thought that this might be particularly beneficial to small businesses. 6. Business Management The separation of business and politics is a hot topic in any discussion of First Nations economic development. It is generally recognized that good business practice requires that business management have the capacity and freedom to take decisions on the basis of operating realities and needs. Political imperatives are often at odds with business needs. For example, band-owned companies are often at risk of being under-capitalized because the directors, generally chief and council, are under enormous pressure to take any profits out of the business on an immediate and continuing basis. Band members tend to want to see immediate benefits in terms of improved public services or, in some cases, per capita distribution of cash. While no one would argue that the benefits of economic development should not be felt in the community, it is critical that a business

17 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS environment be established that permits growth and reinvestment to ensure long term sustainability. Generally, First Nations that are achieving economic progress have devised practical management models that recognize that a total separation of politics and business is not a realistic possibility. Band-owned businesses are the First Nations equivalent of federal Crown corporations and as such are accountable to band members through the elected leadership. Successful businesses are those that have devised ways to demonstrate this accountability in terms of achieving their identified goals which have been articulated so as to achieve public objectives following solid business practices. Beyond the issue of what constitutes a sustainable business model is the question of management capacity. Because First Nations do not have a strong tradition of on-reserve entrepreneurship, there are a fairly limited number of individuals with management skills or experience. While First Nations can hire management, and many do, it is reported that this is a less than ideal situation because outside management does not have a real stake in the economic outcomes and generally cannot be expected to put the degree of effort into an enterprise as owners or community members. In addition, outside managers tend to be very mobile and cannot be counted upon to remain in place over the long term. Many interviewees pointed to the need to build management capacity within First Nations. As described above, thought needs to be given to supporting emerging entrepreneurship in the school system and beyond. There is an adage in the business world that experience is the best teacher. This suggests that the strongest and most successful businesses are those that learn from their mistakes. But, given the well-known statistics on the rate of business failures, it is very common for businesses, especially new businesses, to make fatal mistakes. By definition, it is very difficult to apply the lessons of a fatal mistake if the business no longer exists. The market tends to be rather ruthless and unforgiving, in this way ensuring that only the strong survive. While such a model may be applicable in a large economy, it is not the most efficient way of supporting an emerging First Nations economy. Many interviewees noted the absence of high quality business after-care services which could help build management capacity and materially improve business performance and success rates. Financial institutions perform this function to some extent but they are not necessarily well equipped to understand the intricacies of specific management issues for on-reserve businesses, nor could they be expected to provide disinterested advice to the business managers. This is an area that would benefit from further analysis to determine what kind of support is needed, what institutional structure could best respond to the need and how such services could be financed. 7. Job training There is a strong consensus that job training has not been effectively utilized, largely because of a lack of economic development planning. If First Nations, either separately or collectively, do not plan for activities based upon a realistic assessment of

18 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS local/regional opportunities, it is very difficult to establish training programs that lead to long term employment. The interview data suggests that this problem is increasingly being understood by First Nations and governments. Recent training programs tied specifically to large scale resource developments have been heralded as a positive move that allows First Nations to move beyond job creation to supporting careers. Having said this, there still remains substantial fragmentation between levels of government and aboriginal institutions in terms of utilizing training funds in a manner linked to long term employment. Specifically, it would appear that efforts need to be made to understand the existing capacity of First Nations training institutions and ways to better utilize that capacity to deliver graduates capable of entering the labour force in long term career streams. There appears to be a strong linkage between successful training and the orientation of the training institution. First Nations learners have special needs in terms of how they learn and require a supportive, culturally appropriate environment. Generally these conditions cannot easily be replicated in mainstream institutions. 8. Economic Infrastructure Geography is an important factor in analysing the potential for First Nations economic activity but is not necessarily a determinative factor. That is to say, geography presents a certain reality that must be factored into economic planning but it can be managed. Much more important is the correlation between geography and the availability of economic infrastructure. Lack of infrastructure almost certainly means that economic activity of any significant scale beyond traditional pursuits will be very difficult to pursue. Lack of infrastructure is most often associated with geographic remoteness and it is recognized by most First Nations that extending road or rail networks is a long term proposition unless linked to specific resource developments. In such instances, the project economics will invariably be an important factor in determining the type and scale of any new infrastructure associated with project development. But First Nations argue that governments have a major role in infrastructure investments as part of the calculations of the full socio-economic benefits of resource development opportunities including long term benefits to First Nations. This analysis should take account of such things as program cost reductions that result from lower transportation costs or lower costs as a result of easier access as well as the downstream potential for additional economic activity. 9. First Nations Culture The significance and role that cultural considerations play in economic development is difficult to research and difficult to gauge. The evidence from this overview is that cultural considerations do appear to factor into the kinds of businesses that First Nations will pursue, or to the extent possible, allow within their territories. For example, First

19 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS Nations generally see themselves as respectful users of natural resources which motivate them to pursue activities that fall under the category of sustainable development. A critical debate within First Nations centres on the concept of cultural evolution. There are some who argue that First Nations should focus economic development in the area of traditional pursuits, seemingly for fear of sliding down a slippery slope to assimilation. Others argue the opposite. There are examples where the fruits of economic development have been used to strengthen cultural institutions. Wealth generated by business profits has been used to support language retention programs on the basis that language is a central facet of culture. Somewhere in the middle of this discussion are those that argue that First Nations have traditionally been at the forefront of evolving economic activity, adjusting as new technologies and new partnerships or alliances became available. They argue that First Nations maintained their cultural vibrancy by constant evolution as circumstances changed and it is only in the past 150 years that First Nations have been shut out of participation in the economy. They argue that the legislative regime imposed by the federal government urgently needs renewal to allow First Nations to develop the appropriate institutional structure that will see the re-emergence of a First Nations economy.

20 PUBLIC POLICY FORUM ECONOMIC DEVELOPMENT IN FIRST NATIONS CONCLUSION There are many suggestions for the way forward. As noted in the opening comments, there is great optimism in the First Nations economic development community. All stakeholders, private sector and governments (federal, provincial, municipal, First Nations) can take these promising directions and suggestions and drill down to articulate much more precisely how these might be developed further and implemented. They need to be tested from the perspective of the reality that most First Nations live. Serious effort should be undertaken to engage First Nations in defining success. What is it that First Nations are looking for in terms of economic development? Is it jobs, and if so, what quality? Is it wealth generation, and if so, how is this wealth to be distributed? Is success to be defined by the quality of socio-economic infrastructure in First Nations? There is a long series of questions to be asked but there has to be a concrete and common understanding as to what constitutes success and what measures will be tracked to determine whether the desired results are being achieved. What is to be achieved needs to be coupled with how it is to be achieved. This study demonstrates that there is a strong desire to get out from under the smothering culture of dependency to a positive, future-oriented culture of self-sufficiency. Public policy solutions need to recognize the strength of the First Nations desire to be full participants in directing the course of their own destiny. Governments at all levels must resist the long-standing urges to impose paternalistic solutions. Governments must find ways to break the “fiduciary grid-lock” to constructively engage and share risks with First Nations as partners. For economic development to take hold, this research suggests that First Nations need a new institutional paradigm that removes the burden of complete responsibility for the First Nations economy from Chief and Councils to one where First Nation governments establish the parameters for supporting economic activity within their territories and nourish the emerging spirit of entrepreneurship.