A LEADING local economist this week addressed the worsening financial situation on the island, calling on Bermudians to "pursue niche markets" in order to survive the crunch.

Economist and Bermuda College lecturer Craig Simmons (pictured) has described Bermuda's existing business model as "primitive", asking that locals "leverage their skills" to support the economy.

"It is easy to criticise the narrowness of Bermuda's economic base," Mr. Simmons told the Mid-Ocean News.

"The challenge we face is how to strategically develop new industries. Just as the founders of the existing international business model had a vision, this generation of business and government leaders is duty-bound to create a new vision of Bermuda as an off-shore financial centre.

"In many ways the existing model is primitive to the extent that it relies on locals to sell basic labour services to foreign companies, just as say a multinational mining company might hire locals to extract minerals which are sold overseas. Such activity is not organic to the local economy to the extent that the linkages between the foreign and local companies are few."

Mr. Simmons disagrees with the sentiment shared by Grant Gibbons and Bob Richards (see accompanying story) that Bermuda has "all its eggs in one basket" by relying heavily on income from international business.

"It isn't fair to say that Bermuda presently has the same mono-crop economy of the 1970s and 1980s, when tourism was the main earner of foreign currency," he said.

"Bermuda is an off-shore financial centre. And although many of the international businesses incorporated here are American, their risk-taking and finance activities are global in scope. Bermuda's fortune (or misfortune) is therefore tied to the profitability of those global bets.

"Further, unlike tourism, there is considerable diversity in off-shore finance. It can, however, be argued that we have concentrated overly so in the insurance market."

Mr. Simmons sees the current state of the economy in Bermuda as an opportunity for local workers to develop new markets ¿ an activity, however, that will depend on the support of both the business community and the Government.

"Bermudians are now in a position to leverage their skills either as a support to the risk-taking and financial activities of international businesses or to pursue niche markets," he said.

"It will be difficult for individual entrepreneurs to navigate the latter terrain, thus the need to strategically develop opportunities. This task will out of necessity require institutional and financial support from the business community and Government."

Mr. Simmons believes Bermuda's marquee (re)insurance companies may be saved by US and European bail-outs ¿ although he disagrees with the assertion of one local business leader that our companies are now "wrapped in cotton wool", safe from further crisis.

"It may be the case that US and European governments have wrapped their financial service sectors in cotton wool, but Bermuda's government cannot be accused of creating a moral hazard," he said.

"Having said that, the moral hazard problem has to be weighed against the economic and social costs associated with allowing the financial services sector to succumb to market discipline. Bermuda's international businesses may well benefit from US and European government bailouts without incurring any costs to Bermudian taxpayers; how can this be a bad thing?"

While Dr. Gibbons and Mr. Richards this week claimed Bermuda can be seen as expensive when compared to other jurisdictions, Mr. Simmons is not sure the cost of operating here is any higher than in comparable financial service centres.

"I don't know that Bermuda is too expensive, especially when one compares the cost of living business in, say, Manhattan or London or Dublin," he said.