Nunavut needs an EDA

Organizations as diverse as the Nunavut Association of Municipalities and Nunavut Tunngavik Inc. are calling on the federal government to negotiate an economic development agreement, or “EDA.”

For people involved in business or economic development in the 1980s and early 1990s, the Canada-Northwest Territories economic development agreement was a familiar institution whose existence was taken for granted.

Under those agreements, various funds were created to provide grants and loans to new or existing businesses. Ottawa paid 70 per cent of the cost, while the territorial government paid 30 per cent.

Every year, the EDA injected tens of millions of dollars into businesses in what was then called the Northwest Territories. There are probably many businesses in existence today that may never have started up without help from an EDA fund. Because access to the chartered banks was impossible for most people living in small northern communities, the EDA’s business loan funds became a substitute for banks and a vital source of investment capital.

Such agreements were, and are, not unique to northern Canada. The Atlantic Canada Opportunities Agency still serves Canada’s four Atlantic provinces, while the Western Economic Diversification Canada fund provides a wide range of handouts to small and medium-sized businesses in Manitoba, Saskatchewan, Alberta and British Columbia.

The federal government’s generosity, it seems, extends only to those parts of the country with lots of voters — preferably Liberal voters.

So the Nunavut Association of Municipalities and other organizations are justified in demanding that the federal government negotiate an EDA for Nunavut. If residents of oil-rich Alberta can gain access to federal business development money, why can’t residents in the most economically underdeveloped region of Canada?

Since the creation of Nunavut, Ottawa has been responding to these demands with variations on a tired old theme: that the money the Nunavut government gets under the formula financing agreement is enough.

Even they must realize, however, that the current formula financing agreement is calculated from a set of base figures developed after the federal government imposed severe cutbacks on its transfers to the northern territories in 1995.

This argument also doesn’t explain why residents of a have province like Alberta may benefit from a program that is denied to residents of the poorest regions of Canada.

Having said that, it’s important to remember that an EDA, necessary though it may be, is obviously not the answer to all of Nunavut’s economic challenges.

For example, the lack of access to start-up capital in small communities could also be addressed by the development of a credit union system, an idea that Arctic Co-operatives Ltd. aggressively promoted in the early 1990s.

And like any other government handout program, not all EDA money was spent wisely. Every year, the government of the Northwest Territories was required to write off hundreds of thousands of dollars in bad loans made to failed businesses. The lesson there is that government loan and grant programs cannot transform unviable businesses into viable ones.

Given Nunavut’s high transportation, energy and labour costs, it’s important to remember that government handouts, helpful though they may be, cannot create business opportunities where none existed before.

But that is no reason not to create a new EDA agreement for Nunavut. As long as we remember that it’s only one piece in a very large puzzle, an EDA could bring great benefits to Nunavut’s economy.

JB