Is Asia Y2K Ready? No. Yes. Maybe. Hardly

Updated 8:10 PM ET September 22, 1999

By Regan Morris

SINGAPORE (Reuters) - If the lights go out in Asia when 1999 becomes the much vaunted year 2000 it won't be the first time.

Rife with shoddy, inefficient infrastructure, Asia is no stranger to blackouts and short circuits where perhaps the most common staple of many high-tech sounding "Y2K contingency plans" is the old fashioned, low-tech candle.

"I've got candles and batteries for my mobile phone," said Fazio, who runs a modeling agency in Brunei and Singapore. "What more do I need?"

With 100 days to go, is Asia ready for the so-called millennium bug? It depends on the country --China and Indonesia are making people very nervous. Others, like powerhouse Japan, have slowly inspired confidence.

MANY DON'T BELIEVE THE HYPE

The millennium bug, or Y2K, stems from the 1960s when computers were the size of whole rooms. To save memory space programmers used two digits instead of four to represent years.

Some systems could read 2000 as 1900 and freeze or delete data and disrupt everything from telephones to aircraft to heart pacemakers. Many shrug off the millennium bug as hype because Asia has relatively few computers. Others fear the worst.

"I don't think Asia is ready," said Bibiana Choo, first vice president of Merrill Lynch Southeast Asia. "Particularly the public sectors in financially troubled countries. In Indonesia there is a big risk. Indonesia and India, the Philippines, China -- all of their public sectors are at risk."

"There will be significant problems in Asia with Y2K," Edward Yardeni, chief economist Deutsche Bank told Reuters.

"There are less computers but Asia depends enormously on them," he said. "My sense is that they're (Asian countries) still scrambling to get key systems in order."

MADE IN CHINA

"The number one concern has to be China. China is the major producer for all parts used in assembling cars, it makes key components for assembling electronics," Yardeni said.

He said if China were hit hard it could lead to a devalued yuan currency which would exacerbate the global recession he's forecasted. "I think we're looking at a six-12 month downturn."

"If there are problems in China, there are problems in Asia and there are problems in the U.S.," Yardeni said.

China's state media said Monday that the finance sector had completed its third and final Y2K test and the central bank announced that the industry was "basically ready" for the 21st century.

The State Department warned in mid-September that inland Chinese cities faced potential Y2K computer problems affecting banking, communications, medical services and power.

It also said Pakistan faced potential service disruptions from Y2K, but was more positive about the rest of Asia.

COMEBACK KID

Japan was cause for much Y2K concern and many experts feared the economic giant, obsessed with attempts to stimulate its economy, was not taking the Year 2000 problem seriously.

Despite worrying Japanese media reports that Prime Minister Keizo Obuchi plans to recommend that everyone stockpile food and water as a millennium bug precaution, experts now say the technically savvy Japanese are ready.

"Basically good progress has been made," Tadashi Horiuchi, head of research for the Gartner Group Japan, told Reuters. "There are some problems in local government and small medical institutions, but that's common worldwide."

Many experts say that small businesses like Fazio's modelling agency are the most vulnerable to millennium bug glitches and Horiuchi said small companies in Japan were no different.

"Larger enterprises and governments are doing very well because they have people, they have budgets to do this. Smaller organizations -- they are facing the difficulties," he said.

Horiuchi said Japanese banks, some of the largest in the world, were "fairly well prepared" and that the Japanese Financial Supervisory Agency had been very active in encouraging and monitoring the progress of banks and other institutions.

He said Japan's power companies were also ready.

FINE LINE

While Japan's power supply looks safe, many people expect Y2K-related shortages in developing Asia, especially Indonesia.

"Even at the best of times, Indonesia always has blackouts. If you buy a brand new TV one day, switch it on the next day and it's over," Indonesian expert Leonard Sebastian of the Institute of Southeast Asian Studies told Reuters.

Choo agreed and said Indonesia was far from Y2K ready. "Asia is so used to power outages. If it's a short lapse, well it happens all the time," she said.

She said Indonesia's state-controlled domestic telecommunications company PT Telkom said December 15 was its deadline for Y2K readiness.

"That's cutting it very fine."

Choo said Asia's key systems were ready.

"Critical systems are ready. It's the backroom billing systems and accounting systems -- in Asia a lot of these are inefficient. A small problem could become a very big one. Asia needs to get its backroom in order."

RELIABLE SOURCES?

Most agree that well-oiled Singapore is more than Y2K ready as is Hong Kong. China, India and Pakistan appear on most hit lists as places not to be when the technical millennium dawns.

In the region only South Korea has an independent Y2K verification body. Which means there's a lot of very unreliable Y2K data out there.

"All Y2K data is unverified based mostly on assurances," Yardeni says.

India said Monday that U.S. concerns about its Y2K readiness were misguided and based on old data.

"The Americans are reporting in September based on what they had in March," said Dewang Mehta, president of the National Association of Software Service Companies in New Delhi.

The reality is nobody knows how serious Year 2000 will be.

While some anticipate near-universal martial law as North Korean and ex-Soviet missiles launch themselves, others foresee nothing more than problems programming their VCRs. And who doesn't have problems programming their VCR?

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Ray

-- Ray (ray@totacc.com), September 22, 1999