Benefits to be had and North can cut it
Doug Ashbury
Northern News Services
NNSL (Nov 13/98) - A government report confirms what many Northerners have been saying for months -- the North can support a secondary diamond industry.
The report, released by federal and territorial governments this week, three weeks after BHP's Ekati mine went operational, indicates the NWT has a young, growing, but underemployed, workforce.
The report also said the NWT has the basic infrastructure required for a value-added industry.
"The information and recommendations in this report will assist Northerners and Canadians in setting up a well-rounded, diverse, value-added diamond industry," Economic Development Minister Stephen Kakfwi said.
"We want to see employment and economic benefits come to the North and to aboriginal people," Western Arctic MP Ethel Blondin-Andrew said.
According to the Report of Value-Added Aspects of the Canadian Diamond Industry, Canada has the chance to develop a larger value-added industry during the next few years.
"The value-added aspects of the diamond industry presents further opportunities, especially in the NWT," said Northern Development Minister Jane Stewart.
Natural Resources Minister Ralph Goodale said the NWT can use the report in its efforts to ensure benefits accrue to Northerners.
The report is the result of a joint territorial-federal committee which reviewed trade policy, taxation, access to rough diamonds, training, the role of financial institutions and security.
Despite the recognition of opportunity, Ottawa will not be introducing any special incentives or programs.
But, Revenue Canada will clarify how it taxes jewelry and how this affects value-added diamond industries in the North.
Though Ottawa won't be offering incentives, the GNWT has.
Two companies that have already decided they can cut and polish in the North are Sirius Diamonds and Ice Diamonds. Sirius has been assisted by the GNWT, while Ice Diamonds is likely negotiating.
Sirius will build a plant at the Yellowknife airport, while Ice Diamonds is looking to set up a facility in Hay River.
KEY POINTS FROM THE REPORT
*Costs associated with establishing a business in Yellowknife or Hay River are high by Canadian standards, but are relatively competitive compared to costs in U.S. and European countries with diamond sectors.
*The NWT has a competitive tax structure compared to many provinces. There is no personal income surtax, flat taxes, corporate capital tax or retail sales tax. It also has a stable corporate tax environment and, like the provinces, has a rate for small business which encourages secondary industry.
*The General Agreement on Tariffs and Trade and the North American Free Trade Agreement prohibit export restrictions on unprocessed material for the purpose of promoting further processing of natural resources. That means requiring companies to further sort, evaluate or process diamonds in Canada would be vulnerable to challenge under existing international trade agreements.
*If companies voluntarily develop off-mine site sorting and evaluation facilities, and make rough diamonds available to Canadian manufacturers, there will be no need to legislate such requirements.
*A trained work force is a critical element in developing a value-added industry.
*Training support must be expanded. But, the risk is high because training costs will be expensive with a low return in the short term.
*Huge amounts of capital are required to support a value-added diamond industry in Canada. Expertise in diamond centres in the rest of the world has been supported by specialized financial institutions. Canadian financial institutions have limited experience in supporting a value-added diamond industry. DIAND will attempt to get banks to see the opportunity.
*There will be a criminal element. Police will have to examine diamond-specific investigative tools.
*Natural Resources Canada should take the lead in working with other government and law enforcement agencies to ensure the integrity of the Canadian diamond industry.
