presented by Finance Minister Eugene Cox yesterday.

To His Honour the Speaker and Members of the Honourable House of Assembly Mr. Speaker, The Budget for 2000/01, the first for Bermuda in this new century, reflects this Government's intention to lay a solid foundation for its people for the next one hundred years. It clearly demonstrates a recognition of a mandate for change and illustrates the Government's response to the people's needs and aspirations as demonstrated by its approach to the economy and financial policy.

I last addressed this Honourable House on the matter of the national Budget within three months of an historic election. The new Government was faced with the immediate constitutional responsibility of introducing a Budget to guide the country forward after thirty years of United Bermuda Party management.

With limited opportunity to change the course of UBP Government policies within those three months, the Progressive Labour Party Government nevertheless responded to the challenge and began the process of change and reform that was mandated by the people through its overwhelming victory on 9th November 1998.

Mr. Speaker, the world's economy has undergone great changes during the past century and will continue to change as we enter the next. Bermuda's position in that world economy is at the turning point of change.

The industrial order of the last century was built on raw materials, heavy industry, unskilled manual employment, great concentrations of economic power and friction between capital and labour, and our Island benefited as an alternative to that way of life because Bermuda offered a respite from many of the pressures it created. Developments at the end of that century showed however how countries like Bermuda could change their positions in relation to the world economic order and provide new alternatives for the coming century.

In fact Mr. Speaker I believe that Bermuda can be a leader as we move into the year 2000.

The new economy is radically different. Services, information, skills and to some extent small enterprises will be its cornerstone. It will be difficult to touch, weigh or measure with a yardstick most of its output, and its most valuable assets will be knowledge and creativity.

Mr. Speaker, Bermuda will achieve worldwide prominence in its chosen field if it can excel at generating and disseminating information, and commercially exploiting it. We can gain massive value and commercial advantage in the modern economy by virtue of the services we can provide and by the manner in which we can provide them. Our human and intellectual capital coupled with the technological advantage we enjoy and the legal e-commerce framework which has been created, place Bermuda at the forefront of an extremely promising future.

In this context, Mr. Speaker, this Government's emphasis on education and training is the most farsighted economic investment that this country can make. Educated and equipped people have a great future. Unqualified and ill-prepared people will face continued economic, and hence social, struggle.

We cannot afford to waste any Bermudian lives and opportunities if they as individuals and we collectively as a people are to progress into the next century with confidence, fulfilment and prosperity.

Today therefore the Budget for 2000/01 underlines the Government's commitment to the advancement of the people of Bermuda. We will, as we have said in our platform and in our speeches, put our people first, so that in a new Bermuda they can take advantage of the new world economy and the new opportunities that it offers. Our young people will be given opportunities through education so that they can participate in this country's advancement and not feel alienated in their own country.

Consequently in this first Budget of the new century, the Government will provide extensive new funding for education and training, continued support for Bermuda's health care system and funds to address the housing problem. In addition, the safety and security of the community will be assured through financial support for the administration of justice, law and order. The quality of life in many areas will be improved through funds provided for open spaces in crowded neighbourhoods and solutions to traffic congestion.

Mr. Speaker, Government has followed through on election promises by removing the annual electoral re-registration. A new parliamentary registration procedure has been put in place, making it easier for Bermudians to participate in this process.

In addition, in the coming year there will be administrative changes in the way that Government delivers services. The reform of the Civil Service will impact on the governmental structure, as services are grouped in a more meaningful way for delivery both to the public and internally to Government departments that depend on them. More efficient and effective administration will result.

The Minister of Tourism has been tireless in his efforts to attract new investment in Bermuda and in new transport routes. By working cooperatively with the industry an innovative model for investment has now been created and new air routes and additional flights to Bermuda have opened up. The commitment of Government and hotel owners to the advancement of tourism has been reinforced through intensive working sessions at the highest level.

Government has also endorsed the principle of support for new construction through tax reliefs, and for new ways of operation through tax incentives.

The most recent external review of Bermuda's economy by the international rating agency, Moody's, resulted in a continued stable rating outlook at the Aa1 level. This is a clear vote of confidence in the Island's economy. However the review notes the dominance of international business in our economy, against the weaker performance of tourism.

Bermuda in the International Arena Much of the Island's recent prosperity and many of the new jobs created are as a result of the success of international business in our economy, thus any threats to that sector affect the interest of us all and must be addressed by Government. Accordingly, Mr. Speaker, I am pleased to advise Honourable Members of some of the work carried out in support of international business by the Finance Ministry during the past year.

The Organisation for Economic Co-operation and Development (OECD) composed of countries with the world's strongest and most stable economies, has long promoted the removal of barriers to trade and the easing of restrictions on the free movement of capital, in order to promote world economic growth. We have seen this happen at the same time as advances in technology have revolutionised communications and made close neighbours out of countries that are on opposite sides of the world. We have moved through the globalisation decade of the 1990s and no longer see countries as isolated behind their borders but as connected to and impacted upon by events in other countries.

The removal of barriers to capital movement and the rapid development of telecommunications have provided the opportunity for small economies to have a global impact far in excess of the geographical size of the communities in which those economies have developed.

The growth in the number of such economies has not gone unnoticed, and has resulted in concern that because of low taxes those economies may compete in their non-traditional way by providing services at a competitive cost to the service sectors of traditional or established economies.

The OECD countries in particular have been critically examining those non-traditional and frequently small countries to ensure that any competition occurs on a level playing field, using agreed rules or operating under uniform standards, and is not done through "harmful'' tax competition.

Bermuda was asked by the OECD to respond to suggestions that it is a tax haven or a harmful tax jurisdiction because of the perception that its tax laws encourage mobile capital to leave established economies for purely tax reasons. A delegation comprised of Finance Ministry staff, the Attorney General and I engaged in direct discussions with the OECD Forum established to examine these matters. This resulted in an invitation to continue discussions that we trust will lead to the omission of Bermuda's name from a list of tax havens or harmful tax jurisdictions, currently being prepared by the OECD.

Eighteen months ago, the world's economy was under threat of severe financial disorder resulting from the collapse of the "Tiger Economies'' of Asia, in particular Malaysia. Contemporary economic crises are very different from traditional balance of payments problems and they arise because of a loss of confidence that triggers large capital outflows.

Mr. Speaker, in this global context the world's major nations have called into question the ability of the International Monetary Fund and the World Bank to prevent a threatened collapse of the world economy in the future. They have accordingly instituted steps to reform the global international financial architecture.

An examination of the role of the world's international offshore centres is one of those steps. It was also an issue discussed at the Commonwealth Finance Ministers' meeting I attended in 1999. A subsequent call by the Government of Singapore for the global regulation of all offshore centres highlights why Bermuda must be proactive in addressing potential threats to its business interests. Bermuda must demonstrate aggressively to the world its integrity and high standards as a financial centre, and differentiate itself from jurisdictions of questionable standing. The Financial Stability Forum, composed of G7 and non-G7 countries as part of the move to reform the international financial architecture, will assume the job of reviewing the role of offshore centres and will examine Bermuda's place in the world picture. The Bermuda Monetary Authority and the Ministry have both held initial talks with representatives of the Forum, and will continue these exchanges. We remain vigilant in safeguarding our national interests.

While not in a crisis situation, established economies have also felt pressure from the threat of the mobility of capital. The removal of tariff barriers in the European Union (EU), the reunification of Germany and the introduction of a single currency within the EU have focussed attention within Europe on industrial incentives, trade and the free movement of capital. The single currency has also highlighted differences in costs and, in particular, taxation levels throughout the Union and outside, and business has not been slow to recognise the advantages to be gained through strategic location.

Given Bermuda's competitive position in the international business sector, the Island has been a focus of interest for those countries and organisations concerned about these new economic realities.

Britain's membership in the European Union raises more questions for Bermuda, since the EU Code of Business Conduct is to apply to all Member States.

However the manner in which this Code may be applied to overseas dependent territories of such Member States has not yet been clarified. Concerns about "potential harmful tax measures'' and the application of European tax directives caused the Finance Ministry to visit Brussels to discuss these issues directly with staff of the European Commission. We have been proactive in our approach -- not merely reactive.

The review and reassessment of the economic relationships between the EU and Overseas Territories was due to be completed this month, but current arrangements are likely to remain in place for a further year.

Bermuda is geographically strategically placed proximate to the United States, and between the United States and Europe. Bermuda is also strategically placed as a facilitator for business, connected electronically to the world and with a newly-created electronic business environment that provides a structured and stable international setting for the world's business.

At the same time our geographical location also means that we are close to the principal routes along which illicit drugs travel from producers in South America to markets in North America. It is a fact that the recipients of the proceeds of the illegal drug trade in the Central American and Caribbean region seek to use established and legal activities as ways of legitimising their illegal proceeds. Jurisdictions such as Bermuda with a strong financial services component to their economies, have a special responsibility to ensure that the proceeds of illegal activity cannot infiltrate their business structures, and this applies equally to those seeking to launder funds here electronically from other parts of the globe.

As a member of the Caribbean Financial Action Task Force (CFATF) Bermuda has been reviewed to determine its adherence to the Vienna Convention and its preparedness to deal with money launderers seeking to utilise its financial services. It was pleasing to be able to attend the CFATF Council meeting where the report on Bermuda was adopted and her approach praised and endorsed.

Nevertheless we must continue to be vigilant and I was able to confirm to the Council that the Bermuda Government is committed to maintaining a clean jurisdiction, consistent with our position as one of the world's leading financial centres, and that we are prepared to continue to make changes to our legislation where necessary to continue improvement.