Bermuda's future success can only be realised through a bridging of the gap in the Island's racial economic divide, a Government Senator and businessman told Hamilton Rotarians yesterday over lunch at Front Street's Pier 6.

Senator Everard "Bob'' Richards argued that the "miracle'' of Bermuda's economic progress and development over the last 50 years would not be sustainable "unless the skewed distribution of opportunity and income is redressed.'' Having founded his own business, he outlined four areas where "help is needed,'' beginning with the observation that: The tax system "militates quite heavily against small business, particularly start-up business.'' He said: "I vividly recall having to pay taxes on salary I never took or received. How does that encourage enterprise? I recall having that "sword of Damacles'' hanging over my head for years until my business took hold.

"Even in the most heavily taxed jurisdictions in the world, small businesses are treated more sympathetically.'' "Structured, adequate means of finance do not exist for start-up and embryonic business in Bermuda. Many entrepreneurs like to blame the banks for their problems and the banks have not helped their own cause by favouritism in lending, (at least one case being publicly documented).

"But realistically, banks are not set up to finance start-up businesses. The kind of risks inherent in such enterprises are generally not within the scope of most commercial banks, anywhere, unless the business is well capitalised.

(Which is rarely the case.) "Some sort of venture capital finance vehicle is needed to help facilitate enterprise in Bermuda.'' "Many entrepreneurs lack the requisite management and communication skills to demonstrably control all aspects of the business. Moreover, there is a widespread lack of ability to communicate all salient aspects of the business plan to potential investors and /or financiers.

"This last aspect is particularly vital, as it is the power of persuasion that often is critical to the acquisition of the necessary capital to carry the business forward.'' "The Bermuda Small Business Development Corporation needs to be given more resources. The BSBDC will be able to fulfil some of the requirements I have described, particularly assistance on various aspects of management. More capital is needed to expand its role, but, as presently structured, it can never have the impact that it should have.'' Senator Richards, who obtained his MBA from the University of Windsor, founded Bermuda Asset Management ten years ago, an independent investment services firm, the first of its kind in Bermuda.

He is a director of the Bermuda Commercial Bank and the current chairman of the government advisory body, Bermuda Association of Securities Dealers.

On the issue of race, Senator Richards stated: "If an economy is developing in aggregate, but the growth in income, in wealth and opportunity, is heavily skewed to one sector as opposed to another, and if the demarcation line between these sectors is a racial one, or has race as a major factor, then I submit that this also constitutes unsustainable development.'' Human nature, he said, was manifested in resentment from the more developed sector at having to "support'' the under-developed sector, while the latter resents being locked out of economic opportunity and prosperity.

He noted that mere geographical separation could hide that unsustainability and postpone it in large countries like the US, but not in small places like Bermuda.

"All our wealth,'' he said, "is created from foreign income and capital, and the future prospects of further earnings and investment depend, in large measure, on those foreigners' perceptions of us.'' He stressed the focus on "the skewed distribution of opportunity and income'' as opposed to "distribution of wealth'', adding, "Make no mistake. The failure to redress this economic imbalance poses the single largest threat to the long term health of the Bermuda economy.'' For Senator Richards, the solution must be a collective effort of business, labour and government, and comprising all ethnic and racial sectors.

And while "education'' was one key, more was required.

He said: "My observations over the past 25 years in the business and the public sectors have led me to conclude that there is much more at work here than a mere education gap.

"Indeed, I suspect it can be shown that there is not that much of an education gap between the races in Bermuda anymore and the gap continues to narrow.

"It appears that there are a series of structural impediments at work. There are structural impediments in the work place as well as in the marketplace.'' As a supporter of entrepreneurs, he noted that a number of non-Bermudians have come to Bermuda, started a business and been successful.

But he asked: "Why does this seem so much harder for Bermudian business people and doubly hard for black Bermudian business people? It certainly is not for the lack of trying. There is no shortage of enterprise among our people, as Bermudian entrepreneurs are always popping up.'' He focused on enterprise because of its expected role in Bermuda's future growth, saying that it was where most new jobs were coming from in the US.

Senator Richards also advocated care in the portioning of opportunities on the base lands, saying that Bermuda should take care in determining how local enterprises at all levels could participate in new initiatives.

More entrepreneurs would help the tourism industry as well, because those with a stake in a business are more determined to find ways to improve that business.

More employee-owned hotel properties, for example, are more likely to provide the value for money that visitors are seeking. Bermuda needs to find ways for more Bermudians to "own more factors of production in our primary industries.'' "At the moment, many people perceive that the system is not fair, that the cards are stacked against them, that they're constantly on the outside looking in.

"This kind of disillusionment can be, and has been, contagious and it produces dropouts and all the negative social problems that go with it. It has a direct connection with crime, drug dealing and addiction.'' The importance of "stake-holding'' as a concept toward more successful business, he said, extended further than entrepreneurial activities. Some businesses included performance incentives, bonuses or profit sharing to enable hard working staff to have a real stake in the success of business.

They were no longer merely employees, but actual stake holders.