No more loan guarantees for diamond manufacturers
Northern News Services
Published Friday, December 10, 2010
Under the territorial government's newly revised and considerably streamlined Diamond Policy Framework, the GNWT has pledged to support companies with factories that are "organized and operated in a manner that is economically sustainable."
The new policy - which cost $10,000 to rewrite - states the GNWT will no longer give out loan guarantees to diamond manufacturers.
The change comes weeks after the sister companies of Arslanian Cutting Works in Montreal, which still owes the GNWT $5.8 million, went under receivership.
"We had to write off a significant amount of loans," said McLeod, while declining to specify whether the money owed by Arslanian falls under that category.
"We found that probably, if we didn't have loan guarantees, companies would probably work more efficiently and effectively. I think that if you're going to succeed, you should be able to succeed without loan guarantees."
When the GNWT first established its diamond policy framework in 1999, its intention was to attract a broad section of potential cutters and polishers. And while the GNWT's door remains open to small-scale "cottage" operations, all companies will be held to a high degree of scrutiny when it comes to their finances and track record, said McLeod.
"Times have changed. Ten years ago ... it was felt that we needed a policy framework that would attract small mom and pop operations that would need loan guarantees in order to succeed. What we found is that just providing loan guarantees wasn't the recipe for success. Success is more ideally suited for more mature manufacturers that have a good business plan and vision for what they want to accomplish."
Mayor Gord Van Tighem said he was encouraged by the GNWT's new direction, but added he hopes the territorial government sticks to its promise.
"That was what I said, too: the people that you want working here aren't ones that you have to babysit," said the mayor, who was consulted by the GNWT during the policy revision along with the territory's three diamond mines and manufacturers.
"We had good direction in the beginning and they backed off," said Van Tighem. "I want to see that the momentum continues, because it's very important to the economy of the Northwest Territories."
The new diamond policy now gives the minister of ITI direct power to authorize Approved NWT Diamond Manufacturers, a necessary requirement of any company looking to access rough diamonds set aside by the mines for NWT-based manufacturers. The move is meant to fast-track a previously cumbersome process that required several approvals.
"It took some time," admitted McLeod.
The money charged to companies for certification is used to market authentic Northern diamonds to southern markets. The revised diamond policy now provides for those companies to sit on the newly-created Diamond Manufacturers Marketing Advisory Board.
"The board would work with us so that we maximize the use of these marketing dollars," said McLeod.
With the revised policy now under the GNWT's belt, the territorial government is now focused on finding a buyer for the two plants formerly operated by Arslanian, which has remained inactive for the past year.
"I think that's something that's going to have to run its course, or else we have to look at other facilities," said McLeod. "Certainly there's a lot of interest out there, people that are looking, who have indicated that they have very aggressive plans when and if we can get things going off the ground here."