Finance Minister Paula Cox spent some time in her Budget Statement on Friday noting the success of the Bermuda economy, and rightly so.

It has proven to be remarkably robust, weathering the September 11, 2001 terrorist attacks, a global recession and most recently, Hurricane Fabian, very well.

And while it might seem churlish to question the Island?s economic performance when so much is going right, it would be irresponsible not to acknowledge that not everything is well in the Bermuda economy.

Government?s economic review did note that Bermuda now has one economic pillar ? international business ? while tourism, albeit a major employer, contributes less and less in real and relative terms.

That is no surprise to anyone who has been following Bermuda?s progress over the last decade. And plenty of people have expressed concern about the Island becoming dependent on that single pillar.

But yesterday, businessman Scott Lines expanded on another problem ? the degree to which the international business industry is becoming dependent on the reinsurance sector, masking the Island?s relative decline in other areas.

Mr. Lines, the chief executive officer of LOM Holdings Ltd., warned that Bermuda is in danger of becoming a ?one company town?, with all of the risks that entails.

?The enormous success Bermuda has had over the past several years in attracting reinsurance companies to the Island should not obscure the reality that we are suffering relative declines in many of our other international business areas,? said Mr. Lines.

That means that if the reinsurance sector experienced serious problems, either as a result of business conditions or legislative changes, Bermuda would face a serious problem, without other areas of business to fall back on.

His comments are borne out by some of the statistics produced by Government.

New international business registrations, having reached a high of 1,874 in 2000, fell to 1,118 by the end of 2003.

More worryingly, the number of companies on the register at the end of 2003 totalled 13,509, just 1.4 percent more than there were a year earlier. That means that barely enough companies are coming on to the register to replace those that have closed, changed domiciles or been merged with other companies.

Part of the reason for that is that Bermuda is becoming less competitive. The annual rate of inflation is running about one percentage point higher than most Western countries. Given Bermuda?s already high cost of living, that means that Bermuda is steadily pricing itself out of the market, especially when its competitors are chasing the same fund management, trust and other financial services.

Indeed, Bermuda has even been losing ground in the captive insurance sector, which preceded reinsurance.

Mr. Lines also criticised Bermuda?s decision to abide by the demands of international organisations like the OECD and the European Union in their drives for more disclosure, ?tax harmonisation? and single tax directives.

He noted that ?conditions in the offshore environment remain a difficult place in which to operate, and carry challenges and costs not faced by our onshore competitors?.

?Though the attacks by the OECD upon the offshore world have waned, mainly due to a firm stance taken by Switzerland in terms of what would and would not be acceptable in terms of a global ?level playing field?, it seems that the regulatory bodies in Bermuda and the Channel Islands are ?falling over themselves? to prove to the world?s onshore regulatory bodies how cooperative they can be.?

That means increased costs for compliance and regulation, greater intrusiveness in the affairs of companies and their clients and a decline in innovation.

That is not to say that increased scrutiny is all bad. Bermuda lives on its reputation and to become known as a tax evasion (as opposed to legitimate tax avoidance) or a money laundering centre would do it no good at all.

But there is a balance to be struck, and Mr. Lines argues that Bermuda has gone too far.

It is hard to know if he is right. But ironically, a combination of over-zealous compliance, coupled with the undeserved but damaging daily beating Bermuda is receiving, not only in the US election campaign, but around the world, is compounding the problems the Island faces.