'We're in a downward cycle'
Little economic growth anticipated
for NWT in 2016, says economic organization
Meagan Leonard
Northern News Services
Monday, February 1, 2016
NORTHWEST TERRITORIES
The economic outlook for the NWT is the weakest of all three territories in both the short and long term according to most recent forecasts from the Conference Board of Canada.
NWT Premier Bob McLeod addresses the media in December after being chosen to head the territory for a second term. The leader was in Vancouver last week to discuss solutions for the struggling resource sector with other leaders and industry players. - NNSL file photo
NWT Labour Force Statistics, 2015
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A maturing mining industry and a sluggish base metal market have delayed most new projects, with current operations downsizing or going into hibernation.
"With the shutdown of production at the Snap Lake diamond mine, and weak drilling and exploration activity, no growth is expected in 2016," a recent posting from the organization stated.
However, it's not just the large-scale industries feeling the pinch. The territory's small and medium-sized ventures have also taken a hit.
Reflecting on the past year, NWT Chamber of Commerce executive director Mike Bradshaw said the past two years have followed a consistent trend and he doesn't expect 2016 to be much different.
"We're in a downward cycle and it's extended over the past two and a half years where population and migration has been troublesome and exploration and investment is flat," he told News/North.
"We're going through a pretty rough spell."
The private sector is plagued by three issues he said: its small size, territorial focus on resource development and a general inclination on behalf of the government and residents toward southern business.
While not as noticeable in the capital, these implications become exacerbated in smaller communities such as Hay River, explained Bradshaw, which has seen around 20 businesses shutter in the last couple of years.
"That's a big hit. It's not just jobs, it also affects the tax base," he said. "It has an impact on residential property values. If people are unemployed and can't pay for their mortgage then it affects market demand and market prices. The impacts are pretty significant all the way around."
Bradshaw said he would like to see more contracts allocated to Northern companies, even if they are not the cheapest option.
"We don't do a very good job in the territory at the government level of supporting local business and that's evident in the number of dollars that flow to southern contracts and service providers," he said, adding there is a 30 per cent cost differential between hiring someone from Edmonton and hiring someone from the NWT. "Right away businesses are disadvantaged."
Although the GNWT does have a 15 per cent procurement policy requiring contract authorities to make bid adjustments and give preference to local businesses, Bradshaw says the legislation is around 20 years old and a new system of awarding contracts should be developed.
"It's really exposing local businesses to an unlevel playing field," he said. "It needs to be changed."
Bradshaw says he would also like to see the threshold for sole-source contracts increased to $50,000 from the current $5,000. He said the GNWT has indicated it will raise it to $25,000 this year.
"From our standpoint, they were archaic," he said. "Five thousand for a sole-source contract is not worth somebody's time to bid on because it takes a long time to put together proposals and put out cost estimates."
After mining and metals, small and medium-sized enterprise is the second largest employer in the territory, says Bradshaw, and cannot be neglected.
"It's hard to move very far or very fast when you're constantly trying to get off your knees," he said. "We need to reduce the burden on the private sector to move forward quickly."
Last week Bob McLeod, who is premier and Industry, Tourism and Investment minister, attended the annual Mineral Exploration Roundup in Vancouver.
Speaking to media from the event, he said general consensus is the commodities market will not start to recover for up to two years.
When asked whether De Beer's Gahcho Kue diamond mine, set to begin production in 2016, could carry the NWT economy through the next decade as junior projects get off the ground and current operations wind down, McLeod said he was optimistic about its potential.
"Snap Lake diamond mine is now in care and maintenance and we feel we would need more new projects to start but we think it's important to maintain what we have," he said.
McLeod said he has received written conformation from Prime Minister Justin Trudeau pledging federal support for infrastructure development in the territory. Because the Building Canada fund has been increased, McLeod says they are now able to add more projects to their wish list, although he would not specify what they may be.
"The Government of Canada has asked us to provide more projects because of the fact they've doubled the amount of money that is available," he said.
"We're still working on that because we had submitted our previous list over a year and a half ago."
The New Building Canada Fund has an overall budget of $53 billion with $14 billion earmarked for projects designed to promote economic growth.
Under the previous government, the fund provided $260 million over 10 years.
Receiving priority are large scale projects such as all-weather roads to the Slave Geological Province, Whati and the Mackenzie Valley Highway from Wrigley to Norman Wells.
Funding for maintenance to existing highways has already been approved, said McLeod.
