by Doug Ashbury
Northern News Services

NNSL (Jan 16/98) - Ottawa's contention that Northern benefits from the diamond industry are nothing but a myth is sabotaging territorial attempts to reap rewards from the industry, say government and business leaders.

"Bureaucracy in Ottawa is not working in our interests. It is a point of anger and resentment on our part," Economic Development Minister Stephen Kakfwi said this week.

"We asked Ottawa quite some time ago if they would share (their) information but they flatly refused."

Kakfwi said he has written a letter to the Department of Indian Affairs and Northern Development about a controversial questionnaire distributed last year to London and Antwerp diamond consultants.

The federal government used the questionnaire to help develop its position on management of the diamond industry.

It was sent to European consultants who evaluate diamonds for governments so governments can tax the gems. The consultants are expected to bid on a contract to be Canada's diamond evaluator.

For the North, the most controversial question in the survey asks the consultants to comment on the "myth of benefits to the North from sorting and valuation."

The NWT Chamber of Commerce has also written a letter to DIAND expressing its concerns.

"We do not believe it is appropriate to hire foreign consultants who are competing to be appointed Canada's diamond valuator to write reports ... biased in their design and self-supporting in their response," GNWT Chamber of Commerce president David Connelly wrote.

"Your (Stewart's) staff called in advance of eight of our meetings, promoting your department's view. Normally reserved British businessmen and discreet Belgian diamontaires raised, unsolicited, the issue of feuds, disagreements and fighting between the territorial and federal governments."

Yellowknifer could not confirm that the consultants were paid to respond to the questionnaire.

But Connelly said it was troubling that the officials charged with protecting the North and its aboriginal population seem to be acting against both.

On points of federal-territorial friction, he said it was embarrassing to have Canadian "dirty laundry" aired in the international marketplace.

Kakfwi said the Europeans even knew Joseph Lazarovitch, director of the mineral resources at DIAND, plans to retire soon.

"What relevance does that have? It's absolutely revolting," Kakfwi said.

Lazarovitch could not be reached this week. Many federal offices remain closed due to the ice storms in the Ottawa region.

Kakfwi said he believes Lazarovitch is the author of the questions.

Kakfwi recently visited London and Antwerp to identify potential diamond mine benefits to the North.

After the trip -- Kakfwi's first -- he said a maximum percentage of diamonds should be sorted in the North.

Connelly, who also went to Europe on the trip, identified benefits for the North, among them industry and tourism.

He estimated sorting and evaluating rough diamonds, diamond manufacturing (sawing, cutting polishing), Northern boutique jewelry, retail, tourism and training, could generate 500 jobs.

"The entire diamond industry is worth about $52 billion in sales each year. Of that, $8 billion to $10 billion is generated by mining company's selling into the market," he said.

That means about 80 per cent of the value is in secondary industry and the GNWT is looking to capture some of that 80 per cent, he said.

Ottawa, for its part, has said it can only force a company to sort for royalty purposes, not for marketing or sales of rough diamonds.