Former Premier Sir John Swan has called for the 60/40 rule for retailers to be replaced by a 40/60 rule.

Sir John said the move is necessary in order for the Island to revive tourism and maintain the international business sector.

In a speech to the Institute of Directors on The Challenges of the New Global Order on Saturday, Sir John said the longstanding ownership rule ? that was designed to ensure Bermudians hold at least 60 percent ownership in local businesses ? should be overhauled so that Bermudians need only own 40 percent.

Under a 40/60 rule with an ?agreed dividend policy?, Sir John said that the retail sector would be ?taken up another notch with extremely attractive merchandise, an infusion of foreign capital and management know-how?.

He added that the change would allow local shops to offer prices that could compete with other tourist destinations, thereby saving them from the same fate as Trimingham?s/Smith?s, which is due to close its doors this summer after after 163 years in business.

The former Premier also warned his audience that although Bermuda is governed by the United Kingdom, ?if the US sneezes, we catch a cold?.

He pointed to former US Democratic presidential candidate John Kerry?s bid to close the ?Bermuda Loophole? during his campaign last year and the more recent probe of the insurance industry spearheaded by New York Attorney General Eliot Spitzer.

At the same time, he said, some American states are moving to attract companies domiciled offshore by passing legislation to make their borders more attractive.

?The Spitzer probe into the insurance industry and their practices may shake the very foundation of our international business,? Sir John said. ?Bermuda has to cement its reputation as a responsible jurisdiction.?

The Island must also develop a culture of values for professional and ethical behaviour, he added, and he called for laws and policies to be revised to take into account new developments and concerns both internally and externally.

Sir John said Bermuda is at a ?crossroad? in its dealings with international business with internal feuding only making it easier for ?those who seek to externally affect us, to do so with greater ease?.

He pointed to the shift to outsourcing of jobs to huge low-cost work forces such as China and India, and the potential impact this could have on the US dollar and, therefore, Bermuda.

He warned that the message of globalisation is that Bermuda must ?adjust to the new global realities or we will suffer hard times?.

He said that with the cost of doing business ?almost twice the cost of doing business in other jurisdictions?, companies are now weighing that cost against the tax benefits.

Sir John said increases in land taxes and payroll taxes are now 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 programmes,? he said, adding that this ?extremely worrisome development? needs to be checked at an early stage.

He also cited recent media stories as examples of how local actions can impact the global community.

?Recent headlines in our newspapers could have far reaching repercussions on our tourism and international business,? he said.

?They have become so sensationalised that visitors and the international community reading these papers on the Internet or just simply receiving the news via world of mouth can exercise their option of vacationing or fostering business elsewhere.?