Mahsi, Mr. Speaker. Mr. Speaker, I would like to speak to the motion. I realize that in February, Mr. Speaker, I advised Members in this House that I will not move forward at this point in time on the revision of the business incentive policy. But after further review through the year and with the Members on Cabinet, Cabinet determined that in August, the time was right to move ahead with a revised policy. There are many factors considered in this decision. As a government, we have to look at all the different factors involved in how we do government and how we run our policies. One of the major factors is that our economy is booming. We have a very hot economy, the hottest one in the country.
However, as a government, we are going broke, which is the result of the mining and the oil and gas development, the non-renewable resource development that's going on. It's not because of government spending. It's because we have a booming economy. In fact, there has been a major decrease in the Government of the Northwest Territories capital expenditures the last 10 years because of the increased fiscal pressures on this government and the increased demand for our services as government. While these are compelling reasons to decrease business dependence on government while still promoting the use of goods, services and construction provided by the Business Incentive Policy of this government, this policy has been in place for a number of years, since 1992.
Since that time, the business community has grown in the Northwest Territories, in number and in strength. Keep in mind that in 1992, it was pre-division, pre-diamonds, pre-oil and gas development. Our economy has changed drastically in the past 11 years. In 1992, government spending was one of the major factors driving our economy. Today, non-renewable resource development and its spin-offs are driving economic growth more than government spending ever did.
The NWT business community has benefited greatly from this increased development activity, which we applaud them for. Today, there are 1,422 registered BIP businesses employing 7,673 NWT residents. We know there is competition between the NWT businesses to provide goods and services in all sectors to the Government of the Northwest Territories. There is still a need for a BIP. We are not doing away with it. It's going to be there and the business people will still have preferential treatment by our government to support the development of a healthy private sector, especially in our smaller communities and to make sure that our businesses become more competitive.
Right now, sub-trades in the construction industry are in very high demand, for all private and private sector projects. To try to get somebody to repair your house in this town is next to impossible. This trend is likely to continue with the diamond mines, with BHP opening and operating for five years now. Diavik, we haven't seen it fully ramped up yet with the repercussions to the economy. Then there is the oil and gas pipeline coming down the valley. So the majority of the contract opportunities, especially in the construction sector, are in the private sector and not in the GNWT.
So, Mr. Speaker, this Business Incentive Policy was established to foster the development of competitive and healthy business communities by providing an incentive on bidding on our Government of the Northwest Territories projects. When the agreement on internal trade was developed we, as the Government of the Northwest Territories, specifically requested an exemption for the Business Incentive Policy as it was serving important regional development needs. These are still in place today and will continue to be under our business incentive policy.
Again, I just wanted to reiterate that our business community has grown. Our larger businesses have become more competitive and have increased capacity to undertake a wide range of contracts. So businesses also noticed that the existing business incentive policy does not meet the key needs of the business communities. Through a consultation, which was very extensive, we heard a lot of concerns raised about providing fair and consistent contract administration. Aboriginal organizations felt that the old policy had driven the cost of housing construction higher in the outlying communities. This new revised BIP takes care of that. This is why the GNWT initiated a review of the Business Incentive Policy, public consultations have gone on for more than four years. It is now time for action and Cabinet reviewed the revised policy and had directed me, as Minister of Resources, Wildlife and Economic Development, to implement this policy on October 15.
We have said that we cannot identify the cost of the existing Business Incentive Policy except consider the premiums allowed under the BIP. So we currently do not have a contract report that identifies this premium actually applied on government contracts. So a contract report is being developed to provide this information in the future. However, reference made here today about the news conference from the deputy minister indicated that he indicated the BIP premium was about $10 million. It was based on a number of valued contracts issued by government departments and agencies last year. So this is five per cent of the total value of all contracts over $5,000 awarded last year.
The GNWT issued 2,375 contracts valued over $5,000 in the amount of $216 million last year. So the figure was roughly drawn up in answer to the media question.
We checked with other jurisdictions with preferential policies and learned that they too were unable to quantify their increased costs. These jurisdictions advised that they no longer can afford to pay the premium and subsequently eliminated the preference policies. So we recognize that they must be able to determine the cost for the process of implementing a contract registry. We will produce annual contracting reports.
We have addressed many of the concerns raised in the public and business community during our comprehensive four-year review. These concerns focus on accountability, transparency, definition of a BIP business and monitoring and enforcement. We have made six major changes to the policy. The changes deal with the scope of the policy that now applies to GNWT departments and the applicable agencies only. It now excludes third-party boards, agencies and communities. So band councils that are now paying premiums for their houses, it will no longer be applicable. Definition of NWT content so that all businesses will be entitled to receive a bid adjustment for NWT resident labour.
I just want to make a point of using labour rebates. In one of our consultations, RWED, we proposed the use of these rebates in one of the first rounds of consultation. This method is used currently in the Yukon. The business community turned this option down as the rebate which we believe in the Yukon would take up to a year. So we tried that.
The definition of BIP business to emphasize contributions to the NWT economy. It now applies to businesses that pay corporate, property and payroll taxes in the Northwest Territories. It also encourages employment creation by allowing a bid adjustment for the amount of wages paid to northern residents to the contract.
Establishing a formal complaint mechanism to address contract administration issues. New thresholds will be applicable to the BIP adjustments. So we've done that. These are the different changes we've made to the goods, $25,000, $100,000 to services and $1 million for construction. So the majority of GNWT contracts fall within the range. For example, in 2001-2002, there were 16 construction contracts over $1 million with a total value of $92 million. So under the existing business incentive policy this would allow for a maximum premium of 20 percent or $18 million. We can no longer afford that level of premium and have put this threshold in place so we can get the best value for the dollars we are spending.
Strengthening the administrative procedures to differentiate between business incentive policy administration and contract administration was requested by many businesses. I want to inform the honourable Members that the interim manufacturing directive has not disappeared. It's still in place. We simply receive a report from the Business Advisory Panel containing 21 recommendations to support the value-added and manufacturing industries in the Northwest Territories. We are now reviewing the interim manufacturing directive in light of these recommendations to decide how we can improve this important sector.
So, Mr. Speaker, over the last month, Resources, Wildlife and Economic Development staff have run information sessions in communities to introduce businesses to the revised policy and inform them of changes. The revised policy, along with our new contract registry and reporting system, provides a level playing field for all businesses in the Northwest Territories. These two initiatives ensure that all businesses have an opportunity to bid on Government of the Northwest Territories contracts for goods and services and construction.
As I have committed to the Northwest Territories Construction Association and Northwest Territories Chamber of Business that we will work in partnership with them to ensure that the revised business incentive policy works for both businesses and government, and the revised business policy remains true to the original objective of the existing small, emerging, young Northwest Territories businesses while acknowledging the change in our...