Prime Minister Stephen Harper is greeted by Nunavut MP and Minister of Health Leona Aglukkaq, centre, and Nunavut Premier Eva Aariak as he arrives in Iqaluit Monday night. (Adrian Wyld/Canadian Press)

The headquarters for the new Canadian Northern Economic Development Agency will be located in Iqaluit, Prime Minister Stephen Harper announced on Tuesday.

Harper was joined by Nunavut MP Leona Aglukkaq and Indian and Northern Affairs Minister Chuck Strahl in making the announcement at the city's Arctic Winter Games Arena, as part of the prime minister's five-day tour.

"Today's announcement stands as a clear demonstration of our government's commitment to the North, a commitment to its people, and a commitment to its future," Harper said at the announcement.

"We know the gaze of other nations is increasingly focused here, in our Arctic. By working to reach this region's full potential, full economic potential, we are strengthening its people and we are strengthening the sovereignty of our country."

Harper first promised to set up the stand-alone regional economic development agency in Canada's North during last fall's election campaign. It was also mentioned in last November's throne speech.

Satellite offices in Yellowknife, Whitehorse

The agency, CanNor, will be similar to those that already exist in the western provinces, northern Ontario, Quebec and Atlantic Canada and will deliver federal funding for economic development, advocacy and research.

The agency will have satellite offices in Yellowknife and Whitehorse.

In deciding where to base the agency's headquarters, Harper said senior government officials gave him many reasons why it shouldn't be situated in Iqaluit, citing difficulties finding enough housing and staff.

But that was exactly why he wanted to put the agency in the Nunavut capital, he said.

"The whole idea of this agency is it's supposed to be an economic development agency," Harper said.

"So why don't we, as a federal government, face that directly by putting the agency where the challenges are the greatest, and overcoming them ourselves?"

Nunavut Premier Eva Aariak said she is aware that both the Yukon and the Northwest Territories had wanted to host the CanNor headquarters in their capital cities.

"I'm very much willing to work with [the] other two territories because they will also have an office with the economic development agency here," Aariak said.

The recent federal budget earmarked $50 million, or $10 million for each of the next five years, for the agency, but the government did not reveal then where it would build the agency's head office.

For now, CanNor will take over some existing programs that are currently run by the federal government. Harper said it will later expand and develop its own programs that are adapted to the realities in the three territories.

Harper added that the agency marks the end of an era of paternalism in the North, which was run by the federal government during much of the last century.

Cabinet meeting in Iqaluit

Harper is touring the North as part of a trip meant to demonstrate Canada's Arctic sovereignty. More announcements are expected in Yellowknife and Whitehorse later in the week.

The prime minister was also scheduled to meet with members of his cabinet planning and priorities committee on Tuesday.

Cabinet members at the meeting will include Finance Minister Jim Flaherty, Treasury Board President Vic Toews and Transport Minister John Baird, who arrived with Harper on a flight Monday night. Officials have said their discussions will focus on economic development.

Northwest Territories Premier Floyd Roland has said the Conservatives have not adequately consulted with the territories on what is in the region's best interests.

"When we look at the message the federal government made the last time they travelled through the North, and talked about the icebreakers and so on, that makes good on a national sense … but for ourselves we need some key investments that helps us develop our economy," Roland said.

Operation Nanook

It is the third time Harper has made a summer excursion to the North.

Defence Minister Peter MacKay and Environment Minister Jim Prentice are also travelling in the territories and participating in various meetings and announcements.

The tour includes Harper's participation in Operation Nanook, which involves about 700 military personnel on land and sea and in the air. It will include maritime surveillance patrols in the Hudson and Davis straits and aerial reconnaissance over much of the North. Members of the Canadian Rangers and the Coast Guard also take part.

With files from The Canadian Press