Indigenous and Northern Affairs Committee on May 17th, 2012

[The Chair, Conservative, Chris Warkentin]

Colleagues, we're going to call this meeting to order.

This is the 36th meeting of the Standing Committee on Aboriginal Affairs and Northern Development.

Today we continue the study we've been undertaking over the last number of months, the study of land use and Sustainable economic development for first nations communities.

Today we are privileged to have Mr. Gordon Shanks here to speak to us. We have asked Mr. Shanks to prepare a ten-minute opening statement and then we'll have questions, as is the usual practice.

Mr. Shanks, I'll turn to you to explain a little of your history. I'm sure you'll do that. I won't steal your thunder, as I imagine that's part of your opening statement.

Thanks again for making time to join us today. We certainly appreciate your being available.

[Gordon Shanks, As an Individual]

It's my pleasure.

Mr. Chairman, members of the committee, good afternoon. I want to thank you for the invitation to speak with you about first nations economic development.

As the chairman said, I have a few opening remarks. I'll establish my credentials at the outset, such as they are, to provide a basis for my views on this topic.

My academic training is in economics and regional planning. As an undergraduate, I was fortunate to have studied under Professor Jack Stabler at the University of Saskatchewan, a well-respected practitioner in the art and science of regional economic policy. This sparked a life-long interest in understanding the factors that contribute to or detract from economic development.

I joined the then federal Department of Regional Economic Expansion, DREE, in 1980 and pursued a career with the federal government spanning some 27 years, including time at western economic development, and over 15 years at the Department of Indian Affairs and Northern Development. While at Indian Affairs, I was assistant deputy minister in a variety of roles, including having responsibility for lands and economic development. I've been retired from the public service for some six years.

I understood from your committee clerk that your topic of study is land use and sustainable development, specifically looking at the First Nations Land Management Act. I have some familiarity with the lands act, but I am by no means an expert, and any specific knowledge I have may well be dated.

Having said this, I'm prepared to offer some views to the committee on first nations economic development and engage in a discussion after this presentation, as you wish.

I don’t need to tell the committee that first nations economic development is a puzzling matter. Some first nations succeed beyond their wildest dreams in the most difficult of circumstances, while others fail miserably when it would seem they have the obvious attributes to be very successful. Why is this?

A few years back, when I was with the Public Policy Forum, I did a small research study on the question of barriers to first nations economic development. I interviewed a number of first nation leaders to get their insights into economic success and failure. The number one success factor described to me was a community commitment to succeed, a kind of community self-esteem. This is a rather intangible quality, but it's usually evidenced by strong community leadership.

Strong community leadership is often associated with strong governance. There's a great deal of evidence that good governance is a necessary condition for economic development. In terms of successful first nations, it may even be that good governance is associated with self-governance.

A few years ago the Royal Commission on Aboriginal Peoples looked at this problem and they provided a quote from Paul Samuelson, who some of you will undoubtedly have heard of, a famous American economist. He predicted in the 1950s that Latin America, not Asia, would be the next area of economic growth. Latin America was rich in natural resources, he reasoned, and did not have the population pressures that Asia faced. “I was wrong”, he said subsequently. “The key to economic development is not resources. The key to economic development is effective self-government.”

This same point is made by the Harvard University group that's studied first nations economic development in North America for many years.

A first nations community that exhibits strong self-confidence is also usually characterized by a strong desire to return to self-sufficiency. This translates into a strong work ethic, which often starts a spiral of economic virtue. Success breeds success.

While strong leadership and governance are necessary conditions, are they sufficient? The short answer is no.

Aboriginal businesses face a number of barriers, some of the same barriers that other small non-aboriginal businesses face, but some are unique to first nations. Within first nations there is great diversity.

Access to capital remains an imposing barrier. First nations businesses without a track record have a great deal of trouble attracting the necessary capital to start and successfully operate a business. Those that do attract capital often face crushing interest rates or partnership arrangements that are not necessarily favourable to the first nations.

Geography and lack of natural resource access are significant barriers for some first nations. In some cases, geography itself imposes a serious impediment to economic development. Some first nations simply do not possess any reasonable basis for economic development, whether it be proximity to urban centres or access to natural resource developments. Remote communities face enormous challenges that can be overcome only by finding a niche unrelated to location. But these opportunities are few and far between.

Some first nations leaders lament the lack of mobility of many first nations individuals. One of the enduring debates in regional economic development theory is whether public policy should favour “place prosperity” or “people prosperity”. I don’t pretend to have the full answer, but it seems that efforts to shift economic activity artificially through subsidies have generally had little long-term success. Ensuring that individuals have the capacity to participate in economic activity and supporting mobility to jobs may be a more effective policy.

To be effective, individuals need to be willing to move to where the jobs are. The corollary to labour mobility or access to the labour force is training and education. First nations have traditionally suffered because of low educational attainment. This in turn limits their access to jobs requiring education or to training opportunities requiring a prerequisite level of education. In the long run, education of the first nations population will be a very significant factor in sustainable economic development.

The Indian Act creates barriers to economic development, but it also creates opportunity. The constraints imposed on property ownership on reserve sometimes make it difficult for first nations to obtain the inventory or equipment they need to operate a business. But at the same time, on-reserve first nations individuals or businesses can use their non-tax status to advantage.

Land tenure is an important aspect of economic development. First nations that have clear rules on land tenure can create a business climate of greater certainty. I understand that there is a debate under way on whether fee simple land tenure is a necessary condition for further economic development. Certainty of land tenure is an important aspect, but so is transferability of title. The current legal regime on first nations lands limits tenure to registered Indians as defined by the Indian Act. It's an empirical question whether successful first nations are achieving a lower level of economic activity by limiting ownership only to first nations. I don’t know the answer.

It's important to consider the historic and cultural dimensions of land tenure. If Indian reserves had not been created, it is arguable whether first nations would have survived as vibrant modern entities. The fact that the alienation of first nations reserve land was severely constrained has been an important factor in maintaining first nations as separate entities. It’s not clear what impact it might have if this prohibition were to be removed.

From what I know of the First Nations Land Management Act, I would say that this is a positive institutional arrangement for first nations to facilitate economic development. Institutional arrangements cannot overcome geography or create an educated and trained workforce, but they can create a climate of certainty. According to the first nations leadership associated with the land act, the fact that the land act prohibits first nations from selling reserve lands does not appear to be a significant barrier to economic development at this time.

If a different type of land tenure were to be created, and I don’t have a ready description of what that might be, it would have to build in some kind of guarantee that the land ownership, in and of itself, could not result in first nations lands ceasing to be first nations lands. Equally important to the certainty that land tenure can provide is the matter of environmental regulation. Sustainable economic development goes hand in hand with a regulatory regime that provides timely decisions and a high degree of future certainty. Improvements to the environmental regulatory regime under the land act provide a significant benefit—creating conditions for economic development.

First nations economic development is a puzzling matter, and I don’t think there is any one factor that will make the difference. Rather, I think that the continued efforts of lawmakers and policy-makers working with first nations leaders on a variety of fronts will create an environment increasingly favourable to sustainable economic activity.

Thank you, Mr. Chairman, for the opportunity to make these remarks.

I welcome any questions or comments.

[The Chair, Conservative, Chris Warkentin]

Thank you, Mr. Shanks. We appreciate your opening statement. And we certainly appreciate the background that enables you to bring these statements and answer our questions.

We'll turn to Ms. Crowder to lead off the questioning, for seven minutes.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Thank you, Mr. Chair.

Thank you very much, Mr. Shanks. I appreciate your taking the time to come before the committee today.

I have a number of questions. I'm sure you are familiar with the format. We have seven minutes to exchange.

I'm looking at the paper called Economic Development in First Nations: An Overview of Current Issues, from January 2005. You made a point about own source revenue in your paper. You raised the issue that economic development success is fragile and that there have to be incentives to prosper and reinvest.

We have heard concerns from a number of first nations that when they end up in agreements, whether they are for land claims or self-government, the clawback on OSR, own source revenue, happens far too quickly, before they have actually become firmly established economically. In fact, we recently had a case with the First Nations Education Act in B.C. It wasn't a term of the original act, but we've heard from B.C. first nations that OSR now has to be considered in financing the B.C. First Nations Education Act. Again, these are fragile economies.

I'm wondering if you could comment on that.

[Gordon Shanks]

It is a bit of a conundrum, I would admit. On the one hand, first nations argue that by being given access to resources and having the ability to create their own source revenues, they will become self-sufficient on their own and will not rely on federal or provincial funding. In the long term, that's obviously the objective. The trade-off has to be finding the balance. It's kind of like the welfare trap. If you make $100 on welfare and $101 from working, is it worth it to work for a dollar? Well, most people would argue that yes, it is, but not by that much.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

If you'll forgive me, part of the argument I've heard from first nations is that because there's such a serious infrastructure deficit for many first nations, whether it's roads, water, or housing, the OSR clawback starts before they are actually able to have an equitable standard of living.

I would agree with you. What I hear from first nations is that of course they want to be self-sufficient. They agree that the own source revenue at some point will fund the community. But the clawback happens before they have actually reached that equitable level of living.

[Gordon Shanks]

It's clearly an empirical question. It would vary by circumstance. I can't comment on government policy. I don't know what the current negotiated rules are. Normally there is an expectation that there's going to be a transition and that you are going to take any resources that have arrived through settlement claims or resource development or whatever and will invest them wisely, build up some equity, and become self-sufficient. It's a question of time. I think it's a negotiable item.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

In your paper you also mention the First Nations Land Management Act. I think the language around it was that it's interesting or that it needs consideration. It was a while ago, and of course more first nations are now participating in the FNLMA. The government has indicated that they are going to provide funding to....

Were you able to actually look at some of the success factors for FNLMA bands?

[Gordon Shanks]

I don't recall specifically. I think there are a couple of tangibles and a couple of intangibles.

On the tangible side, the regime created under the lands act is local. It creates local decision-making. Generally, that translates into speed, which is highly desirable in most economic instances. It provides the capacity to be nimble in terms of local circumstances. When you are operating under a national regime, such as the Indian Act, nimbleness is not something that is very common. That is important.

On the intangible side, that notion of community self-esteem, that desire to take charge of your own future, kicks in. That's a fairly powerful thing in a community. It works up and down. I'm sure that people here are familiar with aboriginal communities that, once they have gained some momentum, have had things carry along. If you don't have that ability the lands act provides, you may get one success, and often people will pile on to that and pull it down.

The lands act, by virtue of putting the decision-making at the community level, really does provide some significant benefits. Communities that are using it are showing some of those.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Do you have specific recommendations for this committee from the work that you've done? If we were to improve the First Nations Land Management Act, or some other aspect of land tenure, are there one or two key recommendations you think we should consider?

[Gordon Shanks]

If I had an answer, I would love to give it to you.

I've been thinking about this a lot. Really, I think the key to most successful communities is to get the community members engaged in their own future, essentially having them take charge. Some of the discussion goes around home ownership, for example. Whether it's home ownership or rental, people who have a stake in their future tend to put more effort into it, and if economic development is going to take off, it requires people in the community to really want to succeed and put some effort into it.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Perhaps I'll be able to get back to you.

[The Chair, Conservative, Chris Warkentin]

Thanks, Ms. Crowder.

We'll turn to Mr. Rickford now, for seven minutes.

[Greg Rickford, Conservative, Kenora, ON]

Thank you, Mr. Chair.

Thank you to the witness for coming.

I won't drag out my introductory remarks. We had a chance to share some thoughts and ideas, but for the record, Mr. Shanks, I do want to acknowledge the important work you've done over the course of your career in this specific area. I don't think there's a more timely instance in which your perspective would be more helpful to us.

Very briefly, I have five quick items. I had a chance to read your paper. I appreciated very much the public policy forum discussion you had, and it struck me that, indeed, as we found out in our trips, one size doesn't fit all. You've alluded to those challenges. Obviously, in the great Kenora riding we have first nations communities that are southern and border some of our towns and cities and have access to different kinds of economic development opportunities, and in stark contrast we have more than 25 first nations communities that are completely isolated, accessible only by winter road throughout the winter.

As you've said in your paper, it seems that economic development would be attached primarily to resource development, but there was economic infrastructure that you delivered to government as a message we must invest in.

The four points overarching were the legal instruments and legislation for modern governance, speed of business.... Notwithstanding the fact that the government does have a responsibility to ensure that the business plans being submitted have survived some degree of due diligence and are viable, there continued to be incentives for first nations. And as my colleague pointed out, one I generally agree with, own-source revenue appears to be a subject matter we need to discuss further--use, tenure, and jurisdiction of land, and, finally, economic infrastructure.

The steps required there are things like small business centres. For example, in communities those kinds of fairly safe assets generate a local economy but hopefully contribute to the development of regional activity, for example, in resource development.

With respect then to the use, tenure, and jurisdiction of land, in your paper you mention a high level of frustration with regard to the process of land designation and additions. We've heard lots about additions to reserves, so I was wondering if you could describe for us what specific legislative regulatory obstacles exist to economic development related to use of land and land management, and what specific recommendations you have for us to address them. I'm not sure I got as much of the specificities out of the paper as I needed.

[Gordon Shanks]

One of the challenges, and the lawyers around the table will be aware of this, is when first nations want to develop their lands often an outside non-aboriginal partner wants to get involved. They go to their lawyers and talk about the leases. The first thing their lawyers say is don't touch it with a ten-foot pole. There's this great uncertainty as to what the law really is. It's not as uncertain as most people who aren't in this on more of a full-time basis think. Nonetheless, there's this notion that there's a different world out there.

Businesses like to do things in a way that they know how they work, and they don't like surprises. When you get into leases with first nations designations, first of all, you have to overcome the barrier of getting the approval of the landowners. It appears the landowners generally are the community. You've often got a very high barrier. You might need 50% or even 75% of the population to agree to a decision. To achieve that level is very difficult. We all know how apathetic people can be, particularly at the municipal level. To get a vote of 75% of the people would be an enormous accomplishment. So that's a difficult thing to overcome in first nations. It's the time to do that.

Then it has to come back to the crown. The crown has to make those decisions and an order in council. What ought to be a relatively straightforward legal process often takes months, sometimes years. You know that any business that was interested has probably long gone. The timeframes of these kinds of things can be devastating. On the lands act, if you have that capacity at the local level, you could collapse that enormously.

[Greg Rickford, Conservative, Kenora, ON]

Have you seen, Mr. Shanks, situations regarding the legal instruments or legislation around modern governance? To give a concrete example, the First Nations Land Management Act has built-in governance components that absolutely interface. They're not mutually exclusive to each other. In the context of economic development, we have this to deal with.

In closing, I'll jump right into your comments on page 9 of that paper around the Indian Act. You mention in your introduction that the Indian Act itself poses barriers and opportunities. Very quickly, over the course of your work, do you have some specific examples that have struck you as being particularly problematic or opportunistic?

[Gordon Shanks]

The main impediment for economic development in the Indian Act is the actual ownership of assets on Indian lands and that you can't attach any non-Indian ownership to assets that are on Indian lands.

[Greg Rickford, Conservative, Kenora, ON]

Your rights to security.

[Gordon Shanks]

That's right.

As a consequence, anybody who gets into that either extracts an enormous premium or doesn't do it. You end up with convoluted kinds of relationships, which are costly.

[Greg Rickford, Conservative, Kenora, ON]

Absolutely.

[Gordon Shanks]

Most of these things end up in terms of cost. They can be monetized, and you find that doing business on Indian reserves often just costs a lot more than it ought to.

[The Chair, Conservative, Chris Warkentin]

Thank you, Mr. Rickford.

We'll turn to Ms. Bennett for the next seven minutes.

[Carolyn Bennett, Liberal, St. Paul's, ON]

Thank you very much.

In the two weeks that the committee travelled, I think we heard a lot about ATR, additions to reserve. Even though in our offices we've heard about it, it seems that even for the bands that have self-government or are in first nations land management, the delays in ATR are really hampering them.

I guess I would love to know the insider's view of why on earth this takes so long. I guess there's a view that the Department of Justice seems to get its hands in and that there's even an extra step that's been imposed by this government in the back-and-forth. I did an order paper question, and it doesn't seem that there's a real tracking system.

It also seems that certain chiefs don't even know where they are in the process—a certain piece of paper is missing or something's missing—so that it seems there should be a website the chiefs can use to see how it's going.

I think we were also concerned that a lot seemed to ride on the personality of the people at the regional office, and that if they had a really good relationship with them, then things seemed to happen a little bit better.

When Warren Johnson was here, he said he felt the minister should be able to make these decisions himself instead of it going as an order in council. I suppose I would say, having been at the cabinet table, that all politics is local, and I wondered if you've ever known of any situation where, when it got to cabinet, there was a sober second thought about something. Do you have a view as to whether it needs to go to cabinet or whether or not the minister should make these decisions himself?

[Gordon Shanks]

That's a bundle. Thank you for the questions.

As I said at the outset, my knowledge may well be dated, but my experience with additions to reserve is that the process in itself is fairly straightforward, but given the fact that you're taking land and making it into crown land and then also reserving it for Indians gives it a stature it didn't have before. So it's a serious proposition.

It used to be—and I presume it's still the case—that the department had fairly rigid criteria on what rules have to be met in order for land to be added to a reserve. I never have seen any instances when anybody's personality or whatever would have any play in that. My experience in the delays was that usually there wasn't the information that was required. People would say, “Oh, we sent that in three weeks ago.” Yes, but they sent this and we needed that.

Very often there is a lack of communication. Sometimes the things are incredibly complicated. You have to verify all the outstanding aspects of a piece of land. Are there any liens on it? Are there any environmental problems associated with it? Who owns the mineral rights? Who has any leases on it? All those kinds of things have to be known, clarified, and agreed to. They're often complicated.

[Carolyn Bennett, Liberal, St. Paul's, ON]

Is there a navigator person? Are there enough resources to actually do that two-way communication coaching? Or is it a situation like two field officers dealing with a hundred of these, and the pile keeps—