The Navajo Nation Context
The Navajo Nation is sovereign territory with over 250,000 Navajo people occupying 27,000 square miles of the Colorado Plateau—spanning the states of Arizona, New Mexico, and Utah. Driving through Diné Bikéyah, or Navajoland, you will see stunning southwestern landscapes rich with a cultural history sacred to the Diné people.
What you won’t see is a landscape that reads as rich with economic opportunities. Grocery stores, shops, and businesses are far and in-between. Infrastructure is lacking and close to 30% of residents of the Navajo Nation live without electricity or running water. Poverty rates on Navajo Nation are more than double that of its surrounding states, and unemployment rates are upwards of ten times as high. To enter the Navajo Nation, you must typically pass through a a bustling “bordertown”—Gallup and Farmington, NM from the east or Page and Flagstaff, AZ from the west. These towns possess big and large business, have robust infrastructure, and offer plenty of services. Crossing on to the Navajo Nation, you experience a clear line where prolific investment and economic activity ends, and tribal lands begin.
Over the last year, we examined why this stark division between Navajo Nation and border towns exists and what are the largest barriers Native entrepreneurs face when starting a business on tribal lands. Along with our partner, Change Labs, a Native-led nonprofit on the Navajo Nation that supports Native entrepreneurs, we implemented an adaptation of the World Bank’s Doing Business methodology to understand the Navajo business environment while also capturing the unique context of doing business on the Navajo Nation. Change Labs has suspected that the business environment on Navajo significantly constrains business creation for some time, but now we have both the evidence to back it up and clear strategies to promote economic growth moving forward.
The Research
Our analysis considered eight different processes that an entrepreneur must contend with in order to open a business, get a location, access financial resources, deal with day-to-day operations, and operate in a secure business environment. We benchmarked these processes in two different localities on the Navajo Nation, and in the border town of Cortez, CO for comparison.
What Doing Business on the Navajo Nation Measures
By measuring how difficult it is to complete basic but necessary business operations on Navajo versus a bordertown, our analysis begins to paint a clear picture of the constraints of Native entrepreneurs on the Navajo Nation.
Our Findings
Our main findings can be distilled into a summary of the complexity, time intensity, monetary cost, and the quality of regulation for completing basic business activities on Navajo versus in Cortez, or our comparative bordertown example.
Starting A Business
Starting a business takes a similar number of steps on Navajo compared to in Cortez. However, it takes 7x as long to complete those steps on Navajo compared to Cortez. It is also 2-3x more expensive to start a business on Navajo.
Securing A Location To Do Business
Accessing land on Navajo requires 4x as many procedures, resulting in a process that is 6x as long and 1.3x times more expensive than accessing land in Cortez. Additionally, the land administration system on Navajo is significantly less transparent than in Cortez.
Navajo Nation does not have a system for reviewing building applications and permitting for privately pursued construction. As a result, private contractors may deal with less bureaucracy, but experience higher levels of uncertainty and mixed outcomes of buildings standards
Getting electricity on Navajo requires 2 fewer steps than in Cortez, but it takes 6.5x as long and is 4x as expensive. The average NTUA customer does not experience a higher frequency of power outages than a customer of the Cortez utility provider, but when an outage does occur, it takes 90x longer to resolve on Navajo than Cortez.
Credit Environment, Dealing With Day-To-Day Operations, And Operating In A Secure Environment
Navajo’s credit environment, governed by the Navajo UCC, has 9 of the 12 protections for both lenders and borrowers that have been shown to facilitate lending in economies around the world. Despite this, there are still additional constraints in translating a good credit environment into widespread access to credit.
The total tax burden is significantly lower on Navajo compared to Cortez. However, it does take longer to prepare and pay taxes on Navajo due to the lack of automated processes and online infrastructure and a higher frequency of payments.
Resolving a commercial dispute takes almost two full years on Navajo. The time length of trials exacerbates the cost of a trial, especially with respect to attorney fees, to be upwards of 85% of the claim value.
How does the Navajo business environment compare globally?
Five indicator sets—starting a business, accessing land, getting electricity, the credit environment, and enforcing contracts—are each calibrated into Doing Business Scores which can be compared not just to Cortez, but to 190 economies across the globe. The most glaring comparisons come from accessing land, getting electricity, and enforcing contracts.
Across these three areas, Navajo ranked in the bottom 15 percent of countries. This means that it is more difficult to access land, get a new electrical connection, or enforce contracts on the Navajo Nation than almost anywhere else in the world.
Doing Business Score Rankings
Moving Forward
While a burdensome regulatory business environment is by no means the sole cause or perpetuator of poverty on the Navajo Nation, improving the business environment is one tool to grow a more vibrant, Native-owned economy.
For centuries, the Navajo people have been resilient to constant shocks and threats to their sovereignty and wellbeing. By improving the environment on Navajo Nation for business activity, it makes it easier for Navajo entrepreneurs to do what they do best – create new and innovative ways to support themselves and their communities.
The goal of this research was to provide a benchmark of where the Navajo business environment stands today. With a more comprehensive understanding of which aspects of the Navajo business environment present the largest challenges for tribal business owners, our partner, Change Labs, can create new programs and adapt and improve existing ones to support Native entrepreneurs on tribal lands.
It is also our hope that this research can serve as a policy tool for tribal council members, members at the Division of Economic Development, and tribal leaders across the Nation who already work to support Navajo communities so that they can create data-driven policies that support entrepreneurship and economic growth within Navajo communities.
View the full report here.
