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2003 November Report of the Auditor General of Canada

November 2003 Report—Chapter 9

Exhibit 9.2—The investment approval process is a barrier to doing business on reserves

In 1999, the Indian Taxation Advisory Board and Indian and Northern Affairs Canada commissioned a study by Fiscal Realities Economists, a British Columbia research firm, on the barriers to doing business on reserves. The study compared the investment approval process for four First Nations projects with similar projects in adjacent, non-Aboriginal jurisdictions.

In each case, the study reported that it took significantly longer to approve the project on First Nations lands. There was some variation in the causes, but there were a number of consistent issues:

• implementation of Indian and Northern Affairs Canada's fiduciary obligations, resulting in risk-averse decision-making and lengthy approval times,
• jurisdictional conflicts and differences in regulation in adjacent jurisdictions,
• a lack of administrative capacity within First Nations,
• incomplete separation of politics and administration,
• physical infrastructure unable to meet the needs of business,
• First Nations' uncertainty about public revenues and access to capital,
• inadequate information for investors about opportunities, and
• poor connections between First Nations and business communities.

One example was a property development that occurred in the early 1990s on the lands of one of the First Nations we visited. The study provided a timeline of the development on the First Nation's reserve compared with a neighbouring non-Aboriginal community.*

*We did not reconfirm the analysis of the project undertaken by Fiscal Realities Economists.

Source: Fiscal Realities Economists, Expanding Commercial Activity on First Nation Lands: Lowering the Costs of Doing Business on Reserve, November 1999.