f we are to maintain our economic and social success, Bermuda must not become psychologically, emotionally, socially or economically isolated from the rest of the world. In order for Bermuda to face the challenges of the new global order, it must come face to face with change, embrace it and be one step ahead of it. One of the major problems that most countries and companies have is that they resist and are frightened by change. This resistance to change is what creates the challenges that need to be addressed in order for continued success. This has not been more evident for Bermuda than in recent times.

The developments in information technologies (e.g. microchips, satellites, fibre optics and internet) have significantly changed the world economically and politically in just ten short years. These technologies allow companies and institutions to locate different parts of their research, accounting, marketing and more of their other requirements in different countries, but still tie them together through computers, fax machines, teleconferencing and overnight package delivery as though they were in one place. The speed and low cost of moving goods, services, money and information have virtually eliminated distance as an economic factor.

We must be aware of the challenges that we create for ourselves when we begin to think locally and not globally. We are so small a country that we often do not think of the implications that our local actions may have on the global community. For example, recent headlines in our newspapers could have far reaching repercussions on our tourism and international business. They have become so sensationalised that visitors and the international community reading these papers on the internet or just simply receiving the news via word of mouth can exercise their option of vacationing or fostering business relations elsewhere. Therefore, we must think globally and act locally as well as think locally and act globally ? to put it simply, our actions locally affect us internationally.

During the cold war, Bermuda along with other countries that were strategically important to America enjoyed certain economic infrastructural and social benefits from America. But when the cold war ended, America developed different interests. Some of their resources went into helping old enemies who had become new friends and its focus is becoming more domestic.

In recent years there has been an outcry for Patriotism in the US. Even though we are governed by the United Kingdom, if the US sneezes we catch a cold. This was first evident when we were faced with John Kerry wanting to close the "Bermuda Loophole" when he was campaigning for President and now we are faced with the harsh reality of the Eliot Spitzer probe into the insurance industry. The states have also been passing legislation in Delaware, New York, Hawaii, and Vermont to make it more attractive for companies to establish themselves in those states. We must therefore continue to foster good relationships with the United States and the international business community.

We have now reached the crossroads on how we deal with international business. The external conditions are elusive and not within our control. Bermuda's conditions are within our control. Our internal feuding with ourselves and international business makes it easier for those who seek to externally affect us, to do so with greater ease. The cost of doing business in Bermuda is almost twice the cost of doing business in most other jurisdictions. International companies are comparing the higher cost with the tax benefits of being offshore. However, Bermuda is not the only offshore jurisdiction where international companies have choices at less expense available to them both in and outside the US, particularly in a virtual world where many aspects of business are facilitated electronically. Until recently the main factors contributing to higher costs were non-Bermudian allowances and the cost of non-Bermudian housing.

Recently, however, land taxes and payroll taxes have been increased and are being interpreted as an emerging pattern of tax increases adding to the cost of doing business in Bermuda. There are serious concerns about Bermuda's fiscal disciplines and if Government expenditures continue to unreasonably escalate, further taxes will be needed to meet the cost of Government maintaining its programs. This is an extremely worrisome development and needs to be checked whilst it is still in its early stages.

The Spitzer probe into the insurance industry and their practices may shake the very foundation of our international business. Bermuda has to cement its reputation as a responsible jurisdiction. Trust and integrity play an essential role in all aspects of our life. Our efforts must be to continue to develop a culture of values for professional and ethical behaviour on which well functioning markets depend. Laws and policies should be revised to take into account new developments and concerns both internally and externally. Our continued prosperity depends on the Government, domestic and international business being sensitive to the need for change and to practice the principles of good governance.

There has also been a shift to outsourcing of jobs that may eventually hurt the middle class in the western world. There has not been much reporting on the issue but this matter must be taken seriously. China and India are creating a huge low-cost workforce and many companies are taking advantage of this. This is also the growing trend of shifting power from the West to the East. Even though the United States is poised as the world's superpower, in the next decade it may see power slipping as China and India emerge as global players.

China is a sleeping giant, Napoleon once warned. "Let her sleep, for when she wakes she will shake the world." Within the past few years China has started to emerge as one of the new superpowers of the world. It is having an effect on the world economy. For example, look at what its demand for oil has had on global prices. By the end of the decade they are expected to produce more than half of the world's textiles and a very large portion of the world's demand for manufactured goods. They have overtaken America in consumption of agricultural and industrial staples such as grain, meat, coal and steel. Just the mere fact that they are now being invited to G7 meetings indicates how important they have become in the global economy.

The devaluation of the US dollar against the euro has been seen as a major threat to export markets and consequently to European growth prospects. China has been asked to adopt more flexible currency policies, leading to an upward movement of the Yuan and easing pressure on the dollar. This would affect Bermuda's currency as it is on par with the US dollar.

We must get down to business and not waste a lot of energy and time apportioning blame because globalisation and the New World Economy are presenting each of us with new and challenging situations daily. You do not hear businesses make a great deal of noise and produce no results. They get things done. The opposite can be said for Government, they seem to make a lot of noise and do not seem to get things done. Globalisation sends us a powerful and dramatic message that Bermuda must take action and adjust to the new global realities or we will suffer some hard times.

As we look around the world as to what will and what might affect Bermuda as a country, we must clearly recognise the magnitude of the crisis we face. We must clearly identify the basic issues that we need to tackle to make our tourism successful again. There are some difficult choices that we need to make to reclaim our market share of the tourism industry. Then we have to work together to make appropriate choices based solely on the revival of our tourism and to develop the appropriate solutions, which might be different than those we have used in the past

Retail businesses should be allowed to enter foreign partnerships on a 40/60 basis; 40% Bermudian/60% foreign with an agreed dividend policy. As a result, the retail business would be taken up another notch with extremely attractive merchandise, an infusion of foreign capital and management know-how. This would mean that shops would be able to offer competitive prices with the shopping experiences in most other tourist destinations and we would potentially avoid any other merchants suffering the same fate as Trimingham's and Smiths.

One area that would make Bermuda much more competitive in the global market would be to redevelop the Hamilton waterfront and to make it viable, there should include a casino. Although this seems to be an unpopular idea, we must look at how this could in ways better Bermuda and make it more competitive with other destinations worldwide. Some of the benefits would be:

Obviously huge amounts of earnings that would pay for the redevelopment and that can be used for other projects in the community.

Employment for Locals both on a full time and part time basis as secondary income.

Activity for Visitors including vacationers as well as high ranking business men who are looking for entertainment.

Other places in the world which have been known for their conservatism, places like Singapore, have agreed to have casinos and Pennsylvania and Delaware have considered opening casinos as a way of dealing with some the financial challenges that they are facing as a result of the new direction that the world is headed in.

It is obvious if we do not create a socially acceptable environment for our customers, international business and tourists, they will go elsewhere where it is available.

In relation to the rest of the world, we are very small but that is about the only deficiency that can be stated, we are financially secure, we have the largest middle class per capita society in the world, we have well educated and well travelled citizens, but we have to keeping striving and looking for more cutting edge ways to make us and keep us competitive in this changing world.

The world today is more open and transparent then ever, in order to continue our success we must take timely decisions to ensure the continued growth of our International business and to take bold initiatives to raise our tourist industry out of recession and it should be our mission to spread the benefits of our economic success even more widely within the ranks of ordinary Bermudians.