may be the second best in four years, according to initial estimates by the Ministry of Finance.

And Finance Minister the Hon. David Saul saud on Friday he was confident about the future of Bermuda's international business, but warned that the Island had to be vigilant.

"We have, to a certain degree, become complacent,'' he said. "We must work harder at being accommodating -- in everything from keeping our costs down to remaining a friendly society. There is a lot of competition out there.'' He also said Bermuda had to be careful not to create a problem where none really existed, by feuding and verbally jousting in the Press over issues like Independence.

He was concerned that such public confrontations, by themselves, could destabilise efforts at promoting international business.

But business leaders agree themselves, that Bermuda will have to control the cost of doing international business and provide a better overall offshore product to compete with the Cayman Islands, which is emerging as Bermuda's chief competitor.

Interviews over the last week have revealed that Cayman is cutting into markets that Bermuda service providers have traditionally dominated. These include from mutual funds, private trusts and financial administration.

Bank of Bermuda president Mr. Charles Vaughan-Johnson said: "In the sense that one sees a lot of business going to the Cayman Islands, and to the extent that one thinks of Bermuda as the prime offshore jurisdiction in terms of quality in every way, then one has to reach the inevitable conclusion that for some reason, the business is not coming here but is going to Cayman.'' The Caymans may be beating Bermuda at its own game by being flexible, sources said. They are trying to be in tune with exactly what business people want.

Business leaders who The Royal Gazette contacted were, just like Dr. Saul, concerned too, not to engage in a "self-fulfilling prophecy'', concerned not to create problems for the industry.

But their message was clear: There are some key issues in international business that need to be addressed.

One of them is money. Government will this year provide $600,000 to the Bermuda International Business Association (BIBA), much of it for marketing efforts.

The service providers are also spending money. They've been involved in joint marketing efforts, with different companies sharing costs on the road.

But more may be needed to get Bermuda's message across, as business becomes more competitive.

Managing partner of law firm Appleby, Spurling & Kempe, Mrs. Dianna Kempe, said Bermuda's competitive edge could be sharpened with a philosophical change in its approach to international business.

"This requires from the Government a very strong, philosophical change that as yet is not something that I think the Government is going to embrace,'' she said.

"If we found a way in certain particular types of products, to make them less expensive, it would help. In incorporation costs and annual fees, we are more expensive.'' There are also regulatory restrictions that some believe may not be necessary and that drive some of the business away.

One is the requirement that Government know the beneficial owner of such companies. Proposals for change that would put the onus on the service providers, instead of the Government, to have that knowledge, have been considered more palatable by potential clients.

Mrs. Kempe said: "One of the things that has been suggested is to produce a less expensive company, a holding company which would be owned by a trustee company, where the trustee is a designated trustee under the present legislation.

"Now, if you become a trustee company, you are very carefully vetted. Our answer to the Minister's queries would be that we feel that the trustee company is capable of doing the job and properly vetting the clients.

"There are very fundamental changes in some respects, because Bermuda has always felt that it was important to ensure that its reputation is absolutely pristine. The present philosophical approach has created that environment.

"But the difficulty is that while that is all lovely, what BIBA wants to do is to increase the foreign earnings of Bermuda. That has the effect of helping more and more business people get involved in growing the economic pie. The problem is the two things are mutually incompatible. I advocate a middle road where both sides give a little and we result in getting more business, through being more competitive with places such as Cayman.'' But Dr. Saul said: "The overwhelming objective of the Ministry of Finance is to protect Bermuda's reputation in the international business field. We have to make certain that there is nothing but the best possible business coming here. We will always have to know something about the owners.

"No we can't delegate it any further. We already delegate it to the Bermuda Monetary Authority, who are covered under not only the general secrecy act, but provisions in their own legislation that prohibit them from telling me or people even in my Ministry.

"But we can't delegate it to those in the industry. That just invites trouble. Above all things, our reputation is the best thing we've got, and we must maintain it.

"Even the perception of maintaining it must be there. If we delegate that and everyone was completely honest, it would still show a weakness, a chink in our armour, that I wouldn't like to give up.'' Bank of Butterfield executive Mr. Charles Gunn, said Bermuda is still considered to be the premier domicile, but added potential clients are in increasing numbers looking at the costs of incorporation and comparing it with other jursdictions.

"There has been a general increase in incorporations, but we in the international business community think that there could be a lot more,'' he said. "The stumbling block may be the need for an appropriate corporate vehicle that could be set up and utilised relatively quickly for a reasonable fee.

"Its assets would generally be marketable securities and the shares of that company would be owned by a trust established with one of the trust companies.

It is being done.

"But a holding company can be big and it can be small. There are some that are medium-sized which are going elsewhere, because their principals think it is too expensive to set up here. That includes Government costs and perhaps the professional service fees as well.'' Mr. Vaughan-Johnson said: "The Cayman success has been growing steadily, but it appears to have accelerated in the last year. Everyone who has been down there has noticed the difference.

"There is a very positive attitude from the time one arrives. At the airport, at the hotel and everywhere you are warmly greeted. In the hospitality industry, in business, with the professional services it is an extraordinarily positive attitude.

"People leave with a very nice feeling about the quality of service and the amount of attention they are getting and the warmth of their welcome. That tends to get spread around the professional communities. The lawyers, the accountants and the investment managers around the world help spread the word about that experience.'' Mrs. Kempe added: "They do not have a bureaucratic hassle. Their name of the game is that it is the international business that allows them to have the luxuries of life.

"They don't fuss about whether you are Caymanian or not, whether you are black or white. They come from a whole different cultural approach. It's simple. It's service. You're the client. Just tell me how high you want me to jump! "Bermuda's professional service providers are competing very hard. But in the Caymans, their people are backed by everyone else. Service is sterling in every other industry, including the hospitality industry.

"And it's amazing here at home how many people in our country don't realise the size of the contribution that international business makes to our life.'' Mr. Charles Vaughan-Johnson