through exchange controls will be over. What effect the changes -- whatever they will be -- will have remains to be seen, but as Business reports, everyone has an opinion in this decades-long debate.

Only one man knows for certain what changes Government will make to Bermuda's system of exchange controls when the Budget Statement is read on Monday.

And even Finance Minister the Hon. David Saul may not have completely made up his mind, according to recent speculation that nervousness over Independence had forced him to pull back on more ambitious reforms.

Even though the Statement was said to at the printers on December 24, it is understood that Government was still in discussions with financial institutions last week on the subject.

The most recent theory on reform is that the ten percent overseas tax will be abolished and the overseas investment limit will be increased from $25,000 to $50,000-$100,000. It is possible that a sliding scale will be instituted on the overseas investment tax on large overseas investments.

Government Sen. Grant Gibbons hinted in the Senate on Wednesday that the 0.25 percent foreign currency purchase tax may also be altered, and interest rate ceilings lifted. He argued the alterations would encourage savings.

A phasing-in technique is favoured by those who fear Bermuda has restrained investors for so long that a sudden exodus of funds may ensue. Uncertainty over Independence could cause further dislocation. Dr. Saul is on the record as supporting a gradual approach.

Mr. David Bolden, president of local mutual fund brokerage firm Emerald Financial, fears inexperienced investors may decide to invest in foreign stocks, and find profits are eaten up in trade commissions.

Former Government Senator Ms Lynda Milligan-Whyte, partner at law firm Milligan-Whyte & Smith said that money does not necessarily have to leave Bermuda.

"The average Bermudian should be able to open foreign currency accounts at any of our banks,'' she said. "This will stimulate savings, and would mean more capital at our disposal to invest in projects in Bermuda. At the moment, the structure favours spending, which is a drain on earnings.'' Bermuda's unique geographic features and the limitation this places on development, make it nigh impossible to draw comparisons with other countries that have lifted controls.

Mr. Norman Holbrow of Grosvenor Management said that traditionally Bermudians are fence-sitters.

"We would ask whether any country that has abolished exchange control within the last 20 years has considered reimposing it.

"We perceive certain problems in terms of the mortgage market, and outflows of money. We seek to protect those issues. We worry about competition offshore, but surely the reality is that the financial goal posts are ever-changing, and we must move with the times.

"Our contacts around the world perceive exchange controls as a relic of the past, a curious enigma, totally out of touch with the financial reality of today's world.'' Some local businessmen feel the Bank of Bermuda's publicly expressed fear about foreigners buying local companies is a scare tactic. They suspect that the local banks real concern is that individuals and local companies may seek loans from foreign banks -- robbing the banks of previously guaranteed source of income.

But Mr. Peter Everson, treasurer at Schroders (Bermuda) Ltd. said as long as the 60/40 ownership rule is in place, and real estate ownership is restricted to locals, the amount of security that individuals and businesses can offer to foreign banks is limited.

It is his view that Bermuda companies and individuals would only be able to borrow against existing overseas assets.

For instance, a foreign bank could not repossess a Bermuda home if an individual defaulted on a loan. Similarly, a local business owner could not pledge the business, he said.

The question remains how many Bermudians have sufficient income to export more than the present $25,000 overseas investment limit -- reform of this restriction will surely only affect a tiny minority of the population.

Opposition Sen. Terry Lister estimates that just two percent of the population -- those with household incomes over $150,000 -- stand to gain from relaxation of exchange controls to an upper ceiling of $50,000.

More pressing may be the commonly-held view that as real estate no longer becomes the investment of choice in Bermuda, properties will fall in price.

However, if the overseas investment limit is only levered upwards to a $100,000 ceiling, realtors like Mr. Buddy Rego, president of Rego Limited, feels confident property owners will not sell up, and reinvest overseas.

The overseas investment limit would still be too insubstantial to persuade investors to purchase property overseas. "Good luck to anyone who tries to buy property in New York for $75,000,'' Mr. Rego said.

In addition, it may not be feasible to sell off certain properties, like apartments as separate entities if some amenities are shared with the house it is attached to.

Only a small minority of Bermudians are in the luxurious position of owning more than one property, and Mr. James Gibbons, manager of Gibbons Deposit Company, predicts they will only sell if desperate.

"There will not be a drastic fall in real estate value,'' he said. "During the recession, prices fell to a limited extent, but property owners would not break ranks and sell unless they were desperate.'' It is Mr. Gibbons' opinion that interest rates should be floated before exchange controls are abolished in their entirety.

"There is no political or economic risk in reducing interest rates now,'' said Mr. Gibbons. "It would bring down mortgage rates and help the economy.

It would be dangerous to do it the other way round, by abolishing exchange controls first.'' The relaxation of exchange controls will produce foreign exchange earnings for Bermuda, said Mr. Everson. "At some stage, the profits from investments will be repatriated,'' he said.

"The investment accrues overseas for the benefit of Bermuda individuals and institutions, and should flow back into the island.'' The ten percent overseas tax previously prohibited locals from returning money to the Island.

Local pension funds will be free to invest overseas, and have the potential to grow faster, said Mr. Everson.

Local pensioners may get more benefits, and employers may find pensions contributions costs less, and decide to pass the savings on in the form of increased wages for staff, he said.

Outside Bermuda, pension funds have grown in recent years by about 20 percent per annum if the fund was conservatively managed, and earned more if aggressively managed, said Mr. Everson. In Bermuda, pension funds have grown by about 10 percent per annum in recent years.

Finance Minister the Hon. David Saul.