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A Global Warning on Y2K



Date: Mon, 5 Apr 1999
Subject: Global Warning on Y2K...Chicago Tribune

Hi, friends. I thought you might like to see this authoritative report on the latest evaluations of Y2K readiness in countries around the world. Best wishes, --Judy Laddon


A Global Warning on Y2K

Many nations are unwilling or unable to fix possible computer woes, leaving the U.S. in peril

From Chicago Tribune Website
By Colin McMahon and Laurie Goering
Tribune Foreign Correspondents

March 21, 1999 MOSCOW -- If you're among those worried that the Year 2000 computer bug will bring calamity to the United States, cling to this comforting thought: Things almost certainly will be worse just about everywhere else.

In Russia, no one is using the word Chernobyl, but civilian experts fear the nation's nuclear power reactors could be at risk. The Russian military, in turn, acknowledges its systems that warn of an incoming missile attack are vulnerable to the computer problem.

The good news, though, is very good news. Russian and U.S. officials dismiss the chance that a Y2K glitch could set off an accidental launch of a nuclear missile. They insist the system is just not built that way.

But if nuclear Armageddon does not appear likely, some fear a financial meltdown in this globally interconnected world of markets wired between continents. In Asia, some experts say the fallout from computer problems caused when the clock strikes midnight on Dec. 31, 1999, could be as disastrous as the last 18 months' financial crisis has been for the region.

"I believe it will result in an adjustment in the competitive position of countries," said Phil Dodd, vice president of Unisys' Year 2000 business in Asia and the South Pacific.

For those tracking the race against time to guard against the Y2K problem, Asia is a global focal point because the new year will dawn in that part of the world. New Zealand will be struck first at midnight that fateful Friday, then Australia.

Tokyo will be the first of the world's major financial markets to be exposed, followed by Hong Kong and Singapore, though the real excitement in the markets might not begin until Monday morning, Jan. 3.

Like the proverbial canary in the coal mine, the experience of the nations of Asia and the South Pacific could be illustrative of how serious a problem modern countries will face when the clock strikes midnight this New Year's Eve and ushers in 2000.

At the least, the depth and breadth of Asia's computer problems may provide a harbinger of things to come hours later in the U.S.

No one knows exactly what will happen when the new century is upon us and computers worldwide programmed only to respond to internal clocks set to the last two digits of a year, 99, change to 00. But a Tribune examination of the situation overseas found that the U.S. leads almost every other nation in devoting resources and attention to this potentially devastating problem.

While federal, state and local governments and U.S. companies work to iron out potential Y2K problems before they arise, Americans also are dependent to some extent on how the phenomenon plays out overseas. In the global economy, setbacks to financial institutions and manufacturers from Asia to Africa to South America can affect the U.S. economy and American investors in unforeseeable ways.

So can breakdowns in far-away electrical power systems, water supplies and global communications. As Americans travel in ever-increasing numbers overseas for work and play, questions of air safety abroad also loom larger.

If there is a general assumption among international analysts, it is that the big companies in the most important industries -- airlines, the global financial markets, telecommunications -- are focusing most intently on the Y2K problem and making the most significant effort to deal with it.

In the United Kingdom, for example, top British Airways executives plan to be aloft as the clock strikes midnight on Dec. 31, 1999 -- a gesture to signal confidence that the airline's planes would not be falling out of the sky as a result of computer chaos.

In the U.S., it's probably safe to say, people will be watching.

In Latin America, a region closely linked to the U.S. in trade but mired in recession, no one can say with any certainty just what will happen. Air safety, already an issue across the hemisphere, is one question mark as major airports struggle to upgrade their computer systems.

In a World Bank study of computer preparedness released in January, not one Latin nation surveyed reported that its Y2K correction program was on schedule or completed. Most were still in the planning stages or just beginning corrections -- a situation common in other parts of the world, including Asia, Russia and Africa.

Ecuador and Guatemala reported that they had not yet begun planning for Y2K. In many Latin American countries, including Venezuela, Ecuador and Colombia, falling oil prices have decimated budgets, leaving little funding for Y2K efforts.

Mexican officials say they expect to have all the government's computer bugs fixed well in advance of the end of the year, but the U.S. Senate recently classified Mexico as one of the large countries that had fallen nine months to two years behind schedule in dealing with Y2K.

This, in turn, could have repercussions in the U.S., Mexico's major trading partner linked ever more closely to its southern neighbor by increasing cross-border commerce under the North American Free Trade Agreement.

With so many industries and government functions around the world reliant on computers, it would be impossible to compile a comprehensive catalog of potential problems. Nonetheless, Tribune foreign correspondents found varying degrees of progress in dealing with the situation in key nations and regions around the world:


Russia's response to the Year 2000 computer bug hardly inspires confidence.

Thanks in part, but not solely, to a fractured economy, the government has moved slowly to track down potential dangers. Committees have been formed and studies demanded, but so far funding for any fixes remains almost non-existent.

What little comfort there is, though, is mighty. Experts in and out of Russia dismiss the chance that a Year 2000 glitch could set off an accidental launch of a nuclear missile. The Russian system, officials say, is just not built to measure time that way.

Beyond that absolute catastrophe, though, plenty of other dangers loom.

While nuclear power officials say civilian reactors are safe, independent experts are not so sure. Some analysts also scoff at the bravado shown by oil, gas and electricity providers. And the military acknowledges that its systems to warn of an incoming missile or other attack, systems already beset by problems, are vulnerable.

Small and medium-size businesses, meanwhile, are busy just trying to stay alive amid the nation's economic crisis, not preparing for problems that may or may not come several months hence.

"Of almost any country in the world, Russia is possibly the most psychologically unprepared for confronting the Year 2000 problem," said Robert Farish of International Data Corporation in Moscow.

Even before the Russian ruble plunged last August and the government defaulted on much of its debt, the state could not pay its bills. Now with soldiers, teachers, doctors, etc., still waiting for salaries, finding the money to buy and fix computer systems does not strike everybody as a priority.

"I think the officials on the coordinating commission understand the seriousness," said Vladimir Drozhinov, a computer consultant to the government and private businesses. "But the deputies from our parliament do not understand. They have adopted a new budget and yet there is no separate line in there for this problem."

Russian officials were warned of the threat long before the government finally created a commission to study it this year. Yet they postponed action, and not just because of money woes.

"It's part of the Russian mentality," Drozhinov said. "We have a saying: A Russian does not cross himself before the thunder claps.' "

For the most part, as a U.S. official put it, Russia is likely to suffer "breakdowns rather than blowups."

Water and sewer service might fail. Phones may not work. Gas and electricity supplies could be cut. Few can say whether Moscow's power grid or the nation's air-traffic controllers are dependent on vulnerable computers. Impossible to verify is the army's recent glum estimate that only about 22 percent of its systems are repaired and ready to go. Maybe the real figure is worse.

If such problems persist, they could turn serious. But the kinds of inconveniences forecast in the U.S. -- ATMs running out of cash, flights being delayed, etc. -- will not much bother the average Russian.

The vast majority of Russians do not bank, especially after last year's crash that cost many depositors their savings. Most average Russians do not fly. And should the traffic signals go out, Moscow and other Russian cities have no shortage of traffic police who can be called out to keep the cars moving.

Still, Western governments fear some troubles might seep beyond Russia's borders. The Central Intelligence Agency warns that natural gas giant Gazprom could shut down, cutting off supplies to Europe. Though most Western European nations, which get about 30 percent of their gas from Russia, have stocks to last for a month or so, countries in the former Eastern Bloc and Russia itself are far more at risk, the CIA said.

Gazprom officials dismiss the CIA reports, even mocking one delivered in February by CIA Director George Tenet. "Gazprom has treated such statements by the U.S. spy chief with understanding, considering that one of the methods of his department is precisely to spread rumors," a company spokesman said.

Despite official assurances elsewhere that all is well, worries persist about Russia's nuclear power plants. Should power grids start to fail on Jan. 1, systems that cool the reactors might not get enough energy to function. Worst-case scenario: a meltdown.

Analysts in neighboring Ukraine, home to the Chernobyl plant that in 1986 caused the world's worst nuclear accident, warn that atomic plants there might shut down Jan. 1.

As for Russia's nuclear weapons, the picture appears brighter. Automatic launch technologies, officials say, are immune; manual controls provide further backup.

"I'd like to apologize beforehand if I fail to realize someone's hopes for the Apocalypse," Gen. Vladimir Dvorkin said recently. "There is no such problem in the computerized systems controlling the Strategic Nuclear Force, because there are no calendar dates there.

"The counting of time," Dvorkin said in an eerie explanation of the nature of nuclear war, "begins when an operation is launched."

Just in case, Y2K fears have goaded the U.S. and Russia to speed up plans to work together on a joint early-warning defense system. Both nations will exchange military personnel to monitor each other's facilities during the New Year period.

With its satellite system decaying and no money available to restore it, Russia is struggling to remain at 100 percent readiness. Y2K glitches will only make things worse. By helping Moscow better monitor American launch sites, U.S. officials reason, they can help calm Russian nerves and decrease the chances of an accidental Russian counterstrike.

Arms-control advocates view such cooperation as a perfect opportunity to push ahead with further weapons cuts.

Though Russia and the U.S. have made recent progress on such issues as disposal of weapons-grade plutonium, arms reduction has lost momentum. The START II treaty has yet to be ratified by Russia's parliament. START III will not move ahead without its predecessor. Why not, advocates urge, use the current dialogue to foster new initiatives?

In the meantime, Russia's Defense Ministry, like everyone else, is scratching around for money to clean up its systems. A government official estimated in February that Russia as a whole would need as much as $3 billion to do the job. Officials have since backed off that guess, no doubt realizing that their final budget is likely to be much smaller. Some funds will arrive from Western donors, but nowhere near the amount needed.


Calamities occasionally strike. Sometimes they are weather-related. Sometimes they are the fault of man or machine.

Phil Dodd, the global computing expert at Unisys, can think of dozens of examples of incidents that have created breakdowns in the systems responsible for running the modern world: The multiday power outage in Auckland, New Zealand. Glitches when new airports opened in Hong Kong and Kuala Lumpur, Malaysia. The day pagers went silent across the U.S. The great Canadian ice storm.

"They all caused breakdowns and a lot of pain, but they were geographically isolated. You could manage your way through it. You could get help from elsewhere. The difference with the Year 2000 bug is that pretty much everyone everywhere is going to experience it at the same time," he said.

Dodd said there is no way to predict what will happen when 1999 turns to 2000, but he believes that Asia is particularly at risk.

"There will be some problems we have to manage," Dodd said. "I can't tell you the scale, but it's going to be significant."

In a report that has been rebutted by some government officials, the Gartner Group, an American computer consulting firm, said the rate of Year 2000 problems would be higher in Asia than in Europe or the U.S. The study predicted that in countries such as Japan, there would be critical computer failures at 50 percent of companies, compared with 15 percent in the United States.

The news media in Asia have reported several chilling incidents of problems that suggest Y2K's potential to wreak havoc.

On New Year's Eve 1996, the computer system in an aluminum refining plant in New Zealand crashed, resulting in the overheating of a smelting furnace, according to Japan's Yomiuri newspaper. The system stopped functioning because it could not measure the 366th day of the leap year.

In Singapore at noon on Jan. 1, 1999, 300 taxi meters stopped running. No one was sure why.

Experts said that despite the ultramodern vision that characterizes urban Asia today -- the cellular phone for example, is ubiquitous from Tokyo to Hong Kong to New Delhi -- they are more concerned about the millennium bug's impact on this region because of some of the cultural approaches that remain key to life in Asia.

"People in Asia culturally find it difficult to say things that will cause a loss of face," Dodd said. "A large proportion of the responses related to anything concerning Y2K involves a possible loss of face."

Dodd said he has been at conferences where the first speaker announced that his company started reaction to the millennium bug in 1996 or 1997. And then every other speaker stood up and said the same thing. "It's rubbish," he said. "Making statements like that save face but don't help anybody in the long run."

In Japan, big companies in the telecommunications and banking industries are investing heavily in Y2K, but there has also been a unique cultural distraction that has gotten in the way of preparedness: Japan doesn't use the Western calendar system.

Instead, the nation uses a Japanese imperial system based on the number of years the current emperor has reigned. In Japan, it is Heisei 11, or the 11th year of the reign of Emperor Akihito, known as the Heisei Emperor.

It isn't clear what percentage of Japan's computers use the imperial calendar instead of the Roman calendar, but some do. The problem is that while Japanese software may be immune from the bug, a computer's internal clock could be running on Western time.

"There's a lot more denial here than in the states; people have been lulled because when you look at the computer screen you might see the imperial date," said Leo Keeley, president of the Japanese subsidiary of Platinum Technology, an Oak Brook, Ill., computer consulting company. "The problem is the programming logic behind it may use the Western date format. Even though it looks like year 11, it still really is 1999."

Keeley said there are so many layers of computer technology digitalization found in Japan that taking it all apart to make sure it will work on Jan. 1 is impossible.

"There are so many smart buildings in Japan -- climate control systems, security -- all of it automated with embedded systems, that in certain ways Japan is more exposed than the U.S. is. There's stuff nobody is in charge of," he said. "If the Internet doesn't work, who do you call? If you are in the suburbs and take a train to Tokyo, think of all the systems that have to work perfectly: the switching systems, ticketing, electricity, bars across streets. They are all interdependent."

Nonetheless, efforts are frantically under way in some nations to address the problem. Japanese banks have budgeted about $1 billion for the year to deal with Y2K, according to a Japanese newspaper survey. The Monetary Authority of Singapore has conducted successful tests on its electronic payment and communications networks.

There have been endless conferences, with plans and updates posted on the Internet. Last December saw the Year 2000 Trans-century IT Time Bomb conference in Bangkok.

In Japan, the prime minister's office adopted a Y2K action plan last September, and the Home Affairs Ministry has arranged for engineers from big computing companies like NEC and Fujitsu to visit 300 municipalities this month to identify Y2K problems.

What worries the experts is how all these systems come together.

"I have significant faith in the ability of the telecommunications companies, the transport companies, etc., who are diligently working at this issue," Dodd said.

But even if every computer and telephone in the room is Y2K compliant, they won't work if you can't get a dial tone.

"You might have your technology checked, tested and re-tested, and then stamped 'Y2K compliant,' though I don't know who will do that because nobody can truly gauge, but what happens then if you can't get a supply of water, or your transportation isn't working? You're out of business."


Europe's readiness to deal with the Y2K bug varies widely, but as a whole the continent is lagging behind the U.S., according to technical experts.

Netherlands, the Scandinavian countries and Ireland are reported to be on top of the problem. In Britain, the government appears to be well along in preparations to cope with any and all contingencies.

Italy, on the other hand, is just getting started.

"The Year 2000 doesn't exist in Italy," said Paolo Tedone, vice president of a Milan software company. "You try to raise the awareness in Italy, you speak to people, you show them the evidence, the reports from the U.S., but somehow it's impossible for Italians to believe this is serious. They think that we'll find a way to fix it at the last minute."

Britain began attacking the problem in the mid-1990s under the Tory-led government of then-Prime Minister John Major. A special government task force was set up to monitor the progress of various British industries as they tried to track down and eliminate computer glitches that could disrupt the flow of goods and services.

The largest British companies -- utilities, banks, airlines and major manufacturers -- generally appear to be on schedule in their preparations.

But while 90 percent of Britain's 500 biggest companies appear to be on course for dealing with the Y2K bug, the same cannot be said for about 60 percent of the UK's small to medium-size companies.

"Many said they would be ready by the end of 1998, and we expected to be able to report far more progress today. I'm surprised and disappointed we can't," said Gwynneth Flower, managing director of Action 2000, the government task force.

A television ad campaign aimed at managers of these smaller firms began airing earlier this year. It warns that ignoring the problem could result in lost jobs and revenues, but Action 2000 marketing director Niki Akhurst is concerned that the British public already is suffering "millennium bug fatigue."

British banks, along with other European banks that depend heavily on computerized transactions, have been at the forefront of the Y2K preparations. The banks recently carried out extensive tests on the computer systems that clear checks, deposit salaries and pay bills. Everything reportedly went smoothly.

The banking sector is planning an advertising campaign of its own to build public confidence in the system and avoid a run on ATMs. But following the example of the U.S. Federal Reserve, the Bank of England, the UK's central bank, is planning to have about $15 billion in extra banknotes on hand in case people try to stockpile cash.

Earlier this year, the European Commission put out a report claiming that member states had made significant progress over the last six months of 1998, and that there was now a growing awareness of the urgency of the problem.

It suggested that telecommunications, banking and most major industries on the continent had largely "immunized" themselves from the danger but warned that the health-care sector and Europe's rail network still were vulnerable.

The report also warned that even those countries that had prepared well couldn't consider themselves immunized against the Y2K bug because they could be easily infected by others who were not.

The Netherlands, which is considered a model for European Y2K compliance, has a national ministry to deal with Y2K-related problems. In Spain, the government has created a special task force for each sector of the economy.

Italy, however, is deemed to be a "country at risk." The Italian government did not get around to establishing a commission to look into the matter until early this year.

The Comitato 2000 held its first press conference Jan. 14. "I'm afraid we're starting this a little late," conceded Franco Bassanini, who heads the committee.

But he recalled Italy's heroic efforts to whip its public sector finances into shape to meet the deadline for the launch of the single European currency, the Euro, and predicted it would be the same for the Y2K bug.

"Italy often starts late . . . and then, with bursts of acceleration, we make up for lost time," he said.

Nonetheless, Tedone, the Milan software executive, is worried. "The Comitato 2000 has no money. They meet once a week. Their approach to the problem is that we have to be careful not to cause the public to panic. It's a horror movie," he said. "Can you believe that hospitals in Italy have not yet started to take an inventory of Y2K risks?"

Paolo Gregotti, a Y2K specialist with a trade association for Italian technology companies, also was pessimistic.

"No one here has really understood the dimension of the problem. They all seem to think it's something minor that can be fixed in the morning," he said. "In some ways the economic structure of Italy gives it an advantage. Most of the businesses here are small and medium-size, and it is much easier to fix their problems."

But a new survey by an independent group called Osservatorio 2000 warned that nearly 20 percent of Italy's small-to-medium-size companies would not be in compliance by December -- a situation that could have a severe ripple effect on the nation's economy.

One reason for Italy's apparent complacency is that it is not as thoroughly dependent on computers as some of its European neighbors. Only about 50 percent of the workspaces in Italy's vast public bureaucracy are computerized.

Another reason Italy and its partners in the European Community are calm in the face of the approaching deadline is their recent experience with the transition to a single currency at the beginning of this year.

Having successfully managed the merger of 11 national currencies into one, managers and computer programmers across Europe feel confident they can handle the millennium bug.

Latin America

As part of an experiment last year, technicians at the huge Xingo hydroelectric dam on Brazil's Sao Francisco River set the dates on the plant's main computer forward to Jan. 1, 2000.

What happened next is still sending chills through Latin America.

"When they put the date forward, the whole control board went haywire," remembers Marcos Ozorio, one of the members of Brazil's presidential Year 2000 commission. "Twelve thousand warning lights flashed all across the board, with all kinds of alarm information."

Technicians quickly switched back the date, and are now ferreting out the plant's Y2K bugs. But "if you had been surprised by a situation like this, what you'd have had to do is shut down the plant until you found where the failures were," Ozorio said. "Automatically you'd be taking off the energy board 30 percent of northeast Brazil."

With the end of the year approaching, Brazil and much of Latin America are struggling to deal with the same Y2K problems the U.S. faces, but with less money, less expertise and, in most cases, a very late start.

Much of the region is in the grips of a recession. Unemployment is high and growing. Recent privatizations in Brazil have eliminated governmental responsibility for fixing Y2K bugs but have left new owners scrambling to catch up.

Basically, "there are a whole lot of front-burner issues that make Y2K a lot harder to focus on here than in other places," said Jason Dyett, a telecommunications analyst with Pyramid Research in Sao Paulo.

What it all means is that on Jan. 1, no one knows quite what is going to happen in Latin America.

In a region where computer use has exploded over the last decade, Y2K is a threat, though one prompting less panic than in the U.S.

In Latin America, where planes, phones, computers, power grids, hospitals and the government itself rarely work like clockwork anyway, few people are seriously worried about Y2K.

"I don't believe there will be chaos. I think we're going to face some small problems but they'll just be bothersome," said Marcos Rabstein, director of market relations for Brazil's National Confederation of Industries.

U.S. analysts, however, warn that Rabstein could be wrong and that such relaxed attitudes may be leading toward serious problems in January.

"You get a lot of false optimism from people who started late," said Dale Vecchio, a research director at the Gartner Group, the leading U.S. information technology company focused on Y2K problems.

"The more people look at this problem, the more they find that needs to be fixed," he said. "Even if everybody gets it 95 percent right, what's difficult to predict is the effect of that other 5 percent."

The Gartner Group ranks Brazil, Chile and Peru as the Latin nations least likely to suffer infrastructure breakdowns. Argentina, Colombia, Venezuela, Guatemala and the Dominican Republic have a greater risk, and Ecuador, Costa Rica and Uruguay are at serious risk.

For countries in the last group, interruption of government services is expected to be "widespread and severe." Air transportation likely will be disrupted, and power and telephones outages will be severe, the company predicts.

"We're not saying the whole world comes to a screeching halt, but there may be days of slowdowns that could have a lingering effect," Vecchio said.

The preparedness of air-traffic control systems, in particular, remains a question in much of Latin America. The International Air Transport Association, which has collected Y2K information from Latin America's airports, is forbidden by the airports from making it public, said Tim Goodyear, a spokesman for the agency in Geneva.

"It's impossible to say at this point what facilities in the region might not be ready," he said.

Planes themselves should not be a problem. Over the last few years, IATA member airlines worldwide have spent $2.5 billion updating their planes, Goodyear said, and the latest models are Y2K compliant out of the factory.

"There are a lot of doomsayers talking about planes falling out of the sky, but the thing about an airplane is it can be flown independently of all its computerized systems," he said. "An airplane is an airplane, and it has pilots who can fly it."

In Brazil, air-traffic control, run on an old four-digit French computer system, should have no millennium problems at all, analysts say. Phones will likely work as well as ever -- not that they were ever perfect -- but bills will come late.

Brazilian bank owners are so confident their systems will work perfectly, they have signed commitments to cover the costs of litigation connected to failures.

Power failures, however, remain a possibility across the region. Most hospitals, particularly public ones, are underprepared.

The World Bank study of the hemisphere underscored the difficulties developing nations have in combating the computer bug.

"While wealthy countries and large companies have the money and skilled technicians needed to immunize computers and their operating software from the millennium bug, many developing countries cannot muster the resources to tackle a problem that most see as a vague and distant threat," said James Bond, the World Bank's coordinator of Y2K compliance.

That is troubling, the bank noted, because "the majority of developing countries, even the poorest, have computerized essential services such as power generation, telecommunications, food and fuel distribution and the provision of medical care."

As in other regions, Latin America may face more serious Y2K problems with smaller industries. In Brazil, the region's largest economy, small and medium-size businesses provide 79 percent of jobs, and such companies -- the least prepared -- typically have computerized at least their accounting or payroll systems, Rabstein said.

Small company failures are, in turn, a worry for larger industries, such as Brazil's huge auto assembly plants, which fear supplier shutdowns could leave them without key parts.

"Any one small component, even a door handle, could end up damaging productivity," warned Gary Parinella, a Chicago-based analyst with Electronic Data Systems who was called in to consult on Y2K readiness with a major U.S. auto manufacturer in Sao Paulo.

Such fears have led nervous big firms to try to "trace an almost endless supply chain going back, to the maker of the door handle and then the company that supplies them the plastic and the electricity," Parinella said. In most cases, Y2K certification is hard to find.

With the millennium bug, "one of the biggest risks is not knowing how prepared your business partners are," he said.

Colin McMahon reported this account from Moscow and Laurie Goering from Rio de Janeiro. Tribune foreign correspondents Michael Lev from Tokyo and Tom Hundley from Rome also contributed to this report.

Computer programmers work at the Year 2000 Conversion Center of IBM Japan LTD., at its Makuhari office, east of Tokyo. (Associated Press)