An improving economy in the US is unlikely to lessen pressure on the Obama government to crack down on perceived tax havens, according to HSBC chief economist Ian Morris, writes Tania Targett.

"Overall that strategy of the US government has persisted," he said. "Even if the economic environment was improving strongly, I don't expect to see much change on that front."

Bank of Bermuda president and CEO Philip Butterfield said, however, Bermuda is already moving in a proactive fashion to meet that pressure. "I think tax harmonisation is a reality. It will force ourselves and other locations to be clear about our reasons for being," he said.

To that end Government has been working with the private sector on a project called "Bermuda First" to develop a strategy to adapt to the changing global climate. "We're looking for the way forward to retain and sustain Bermuda," Mr. Butterfield said. A report from Bermuda First should be issued within the next three to four weeks, outlining strategies and seeking feedback. "What was normal will not be normal going ahead," Mr. Butterfield said.

Despite the Island's close ties to a stabilising US economy, the bank chief suggested Bermuda can expect the current downturn conditions to prevail for the moment. Mr. Butterfield said the Island must continue to track employment closely and monitor sector contribution to income.

Housing demand in Bermuda seems to be low, he added, but the bank intends to keep its base lending rate in proximity to the US Fed rate. "Most Bermudians seem to be deferring (housing) decisions until conditions improve," he said.

The timing may now be right, however, to make key investments in the Island's tourism product, so that when a turnaround does occur, Bermuda will be well positioned to meet international business needs, Mr. Butterfield suggested. "We need to be making selective, focused investments in hospitality now because it will be a number of years before that produces end profit," he said.