which discourage non-Bermudians from buying property in Bermuda.

In a letter to the Bank's shareholders, Mr. Lines said Bermuda's economy needed more foreign residents.

This would bring much-needed foreign currency to the Island and create more jobs for Bermudians, he said.

"Facing further reductions in the resident population, it is obvious Government must now re-address some of the rules which were designed to discourage non-residents from establishing a physical presence on the Island,'' said Mr. Lines.

"If we wish to increase foreign exchange earnings and job opportunities, we must recognise that changing times and circumstances require new rules.'' Currently, non-Bermudians buying local property must pay a tax amounting to 20 percent of the purchase price. This was too high, he said.

He added: "Amongst the changes which must be addressed is the need to reduce the tax and stamp duties on condominiums purchased by non-residents and the Annual Rental Value of properties which qualify for foreign ownership.

"It should be noted that resident visitors generate employment for real estate agents, maintenance and a variety of trades people, as well as revenues for Belco, Telco and other local support services.'' Also in his letter to shareholders, Mr. Lines revealed that the Bank of Bermuda expected a "substantial'' increase in earnings for the first six months of fiscal 1993.

This profit increase was expected even though the Bank had set aside "significant additional amounts'' for possible loan losses because of the downturn in the economy.

"The improvement in earnings is due to continuing growth in international business and the benefits of our cost control programme,'' he said.

Mr. Lines said he was optimistic about Bermuda's economic recovery during the coming year.

"Based on expectations for a three percent real growth rate in the United States and inflation rates of three percent or less in the coming year, we are hopeful Bermuda will enjoy a modest recovery in visitor arrivals and tourist trade,'' he added.

But he said the recovery depended on an improvement in the quality of services offered to visitors and little or no increases in prices.

"Tourists are now extremely price sensitive and expect great value for their dollars,'' said Mr. Lines.

"Our expectations are also tempered by the possibility of disruptions in services, due to labour disputes, for these would not be acceptable to those we hope to attract to the Island.

"The coming year is going to be a challenging time for management and it is essential for all who are involved in the tourist industry to do everything possible to avoid confrontations, make visitors feel welcome and to offer real value for amounts paid.'' Bermuda's tourists had suffered far more due to the recession than Bermuda residents, said Mr. Lines.

"Most Bermudians have been able to adjust their spending to lower levels of income without difficulty,'' he added.