Building a Competitive First Nation Investment Climate Tulo Centre of Indigenous Economics
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Building a Competitive First Nation Investment Climate Tulo Centre of Indigenous Economics www.tulo.ca BUILDING A COMPETITIVE FIRST NATION INVESTMENT CLIMATE by Tulo Centre of Indigenous Economics is licensed under a Creative Commons Attriubution-NonCommercial 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc/4.0/ This publication is based on work by www.tulo.ca Permissions beyond the scope of this license maybe available at www.tulo.ca For more information, please visit www.tulo.ca First Edition: December 2014 ISBN: 978-0-9940586-0-7 TULO CENTRE OF INDIGENOUS ECONOMICS Acknowledgements This textbook was conceived and developed by the Tulo Centre of Indigenous Economics. It was inspired by the life work of Clarence T. (Manny) Jules, Chief Commissioner of the First Nations Tax Commission, whose vision has always been to restore First Nation and tribal jurisdiction and political power through economic development. The first edition of this text book is the collaborative work of many individuals and contributors as well as three generous sponsors. Work began on this text book in early 2012 with a generous grant from the Donner Canadian Foundation. Financial support was also provided by the First Nations Tax Commission and the Tulo Centre. The open format means the number of contributors will grow but it is important to acknowledge and express gratitude to those that are responsible for the creation of this first edition. The Chair of the Tulo Centre, Chief Mike Lebourdais provided direction, encouragement and contributed a number of examples and quotes. The Academic Chair of the Tulo Centre and Professor Emeritus, Dr. Robert Bish, lent his substantial experience and editorial expertise to all chapters of the text. Bud Smith, Vice Chair of the Tulo Centre, provided support and expertise. Sarah Jules, Tulo Centre Administrator, managed contracts, corrected and formatted this text. Dr. Andre Le Dressay, Director of the Tulo Centre, wrote the first edition of all the chapters except chapters 3 and 4 although he also contributed to those. Chapter 3 was a collaborative effort involving Dr. Brian Ballantyne of the Surveyor General Branch, Natural Resource Canada with contributions from Dr. Tom Flanagan, Dr. Terry Anderson of the Property and Environment Research Centre (PERC), C.T. Manny Jules and Chief Lebourdais. Dr. Anderson also made significant contributions to chapters 1, 2, and 5. Chapter 4 was written by Marie-Louise Potvin, a lawyer who is a legal counsel to the First Nation Tax Commission and an instructor at the Tulo Centre of Indigenous Economics. Significant contributions to chapters 1, 2 and 5 were provided by Sean Regan from PERC and Greg Richard from Fiscal Realities Economists. Norm Lavallee and Jason Reeves from Fiscal Realities Economists made significant research and content contributions to all of the chapters in this text book. Kate McCue and Tylor Kroad from Fiscal Realities made helpful research contributions to Chapters 5 and 6. A number of comments and editorial suggestions were provided by Ken Scopick and Trenton Paul of the First Nations Tax Commission. Thank you Ken and Trenton. This textbook could not have been completed without the administrative support of Katherine Livingstone of Fiscal Realities and Jan Davis of the First Nations Tax Commission. 2 BUILDING A COMPETITIVE FIRST NATION INVESTMENT CLIMATE Table of Contents FOREWARD ........................................................................................ 4 CHAPTER 1 Introducing Institutional and Indigenous Economics ....................... 11 CHAPTER 2 The Investment Climate and Transaction Costs ............................... 37 CHAPTER 3 Establishing Property Rights Systems To Facilitate Investment ..... 69 CHAPTER 4 The Legal Framework to Support Investment ................................ 108 CHAPTER 5 Elements of a Competitive First Nation Investment Climate: Fiscal Framework ............................................................................... 143 CHAPTER 6 Elements of a Competitive First Nation Investment Climate: Building Infrastructure ...................................................................... 177 CHAPTER 7 Elements of a Competitive First Nation Investment Climate: Administration Framework ............................................................... 207 3 TULO CENTRE OF INDIGENOUS ECONOMICS FOREWARD by Chief Michael Lebourdais, Chair of the Tulo Centre of Indigenous Economics am the Chief of the Whispering Pine/Clinton Indian Band. We are a small community. Most of our members live on a reserve just north of Kamloops, BC. We were moved there in the 1970s to make way I for a hydro project. We are a young and entrepreneurial community. More than 60% of our population is less than 25. Our members include ranchers, tradespeople, nurses and engineers. They have the same dreams as other young people – to receive primary and secondary education at the same standard as other residents of Canada and the United States, to have post-secondary opportunities to acquire skills and education, to find meaningful employment, to live in a healthy safe community, to raise a family, to own their own home and retire comfortably. I became a chief to help realize the dreams of our youth helping to create economic opportunities. I recognize the barriers they face on our lands. They do not have the same access to capital or equity in their homes, as they would off our lands. They don’t’ have the same quality of roads, water and environmental infrastructure, as they would off our lands. It 4 BUILDING A COMPETITIVE FIRST NATION INVESTMENT CLIMATE takes 4 to 6 times longer to complete an investment transaction on our lands than off because we are missing the laws, procedures, access to financing, infrastructure and administrative capacity that exists off our lands. I appreciate the challenges our youth face on a personal level. I come from the First Nations Brady Bunch. When my mother and father were married, they each brought three children into the relationship. The larger family meant my father had to build another house beside the one he already had. My father had a ranch and two houses but when he went into a bank in the 1980s and applied for a credit card (so he could rent a car and reserve a hotel, like any other Canadian), he was turned down; because he was told he didn’t have any collateral. His two houses and his ranch were insufficient collateral because in Canada the Indian Act states that an Indian reserve is “a tract of land, the legal title to which is vested in Her Majesty”. We don’t even own our own lands. We don’t have the legal and administrative framework to make our lands valuable. We don’t have sufficient secure independent revenue streams to build competitive infrastructure and provide quality services. In short, we do not have the necessary investment climate to meet our community objectives. This is why I am the chair of the Tulo Centre of Indigenous Economics. Our purpose is to help tribes and First Nations fill these gaps preventing us from participating in the economy. Our purpose is to provide the knowledge and skills to develop our laws, establish our property rights, generate independent revenues to build infrastructure and lower the costs of doing business on our lands. We want to learn from and share our successes. This is why we have created this open electronic textbook. It is available for all interested students. It compiles all the knowledge we have gathered so far about building a successful First Nation and tribal investment climate. I hope it is helpful to you. I hope you can contribute your successes to this textbook to expand our knowledge. Most of all I hope it helps restore the values that federal legislation like the Indian Act took away. 5 TULO CENTRE OF INDIGENOUS ECONOMICS What is the Tulo Centre of Indigenous Economics? The Tulo Centre of Indigenous Economics (Tulo Centre) is a not-for- profit institution, based in Kamloops, British Columbia, whose mission is to help interested indigenous governments build legal, administrative, and infrastructure frameworks that support markets on their lands. Tulo is the Chinook word for “earned profit”. Chinook was an aboriginal trading language used between Alaska and California, and profits were earned by innovating to best serve trading partners in indigenous markets. The Chair of the Tulo Centre is Chief Michael LeBourdais from the Whispering Pines/Clinton Indian Band. The other Board Members are Bud Smith (former Attorney General of British Columbia) and Dr. Robert Bish (Professor Emeritus, Economics and Public Administration, University of Victoria). The Director of the Tulo Centre is Andre Le Dressay (an adjunct Professor of Economics at Thompson Rivers University) and the administrator is Sarah Jules. The Tulo Centre was founded by Clarence T. (Manny) Jules, the Chief Commissioner of the First Nations Tax Commission. What is the Tulo Centre’s philosophy? The engine of economic growth is private investment. Investment can be generated from local residents through savings, through home equity or from outside sources. In Canada, private sector investment outweighs public sector investment by five to one.1 Three times as many jobs are created in the private sector as in the public sector.2 Attracting private investment is thus the key to economic growth. The role of investment in building First Nation economies is direct; markets are the basis for economic prosperity. The critical