Tourism was no longer the second pillar of the economy behind international business in the first half of 2001 as it slipped to third place behind investment income from overseas, it has emerged.

The changing nature of Bermuda's economy was highlighted by Opposition Leader and Shadow Finance Minister Grant Gibbons who followed former finance minister and Premier David Saul in referring to money that Bermudians and others had invested overseas as another "leg of the economy".

Dr. Gibbons pointed to the Bermuda Monetary Authority's (BMA) statistics for the second quarter of 2001 saying: "Receipts for travel (from tourism) for the first quarter of 2001 and the second quarter of 2001 is $173 million, whereas if you look at investment income coming back to Bermuda in the first half of 2001, it is $222 million which is actually more than the income from tourism which I think is very interesting."

Dr. Gibbons said looking back, it is easy to see the decline in visitor expenditure, whereas the investment income is rising.

He said: "I think it is an interesting indication. For the first time, as far as I have seen it, you actually have investment income from Bermudian and other assets abroad, where some of that money is being repatriated, and at least the income from that is more than what we are getting from tourism. So in the first half, it has replaced tourism as the second leg of the economy."

Dr. Gibbons said he did not know if this trend would continue into the second half of the year as global markets have been extremely volatile in 2001, but said: "Nevertheless, I think it is very interesting."

As a further indication of the changing nature of the Island's economy, Dr. Gibbons also said the number of applications approved for new exempt companies - which he said was a measure of activity for this sector - were down compared to last year.

"If you add together the first and second quarter of 2000, you get 890 (approved applications), and if you add together the first and second quarters of 2001, you get 662. What you see is a decline of a little over 25 percent in the new applications approved, which is activity in terms of new international business coming here. To some degree that may be offset in the most recent quarter by insurance companies coming, but nevertheless I think it is an interesting trend from one year to the next year."

Dr. Gibbons said he did not know if this was an indication that Bermuda's attraction of foreign companies had peaked or whether some other factors influenced the decline but said: "It is an indicator that we have to take very seriously."

Dr. Gibbons continued: "It is not an indication of capital but what you can take it as is an indication that in the first half of 2000, and the first half of 2001, there was a clear decline in the number of exempt companies applying and being approved to actually set up here. If you want to look at it logically, which obviously one should, if we say that part of that was due to a slowdown in business activity generally, both in the US and Europe and everywhere else, we know the US economy actually went into recession in the second quarter of this year, stayed in recession in the third quarter and presumably will be in recession for the fourth quarter as well. Part of it may be due to that, part of it may also be - and this is speculation - increasing concern about offshore business, and some of the issues that we get into there with the spotlight being raised by onshore regulators and onshore Governments in terms of people setting up offshore businesses. Or it could be that Bermuda is becoming less competitive. It is hard to say. You would have to look at other jurisdictions to see."

Finance Minister Eugene Cox could not be contacted for comment yesterday.