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Asia will face big Y2K hit

November 13, 1998
Web posted at: 10:52 AM ET

by David Legard

(IDG) -- A total of 40% of companies worldwide will experience a mission-critical information technology failure because of the year 2000 problem. But the rate of those affected in Asia will be higher, according to Jim Duggan, research director at Gartner Group Inc.

Among Asian countries, only Taiwan, South Korea and Singapore feature in Gartner's Level 2 readiness list (see below), and none made it to Level 1, Duggan said. Level 2 readiness indicates a predicted Y2K-related mission-critical failure among 33% of a country's companies, while Level 1 finds that 15% of a nation's companies are expected to suffer a Y2K-related mission-critical failure.

Asian countries in Level 3 (50% failure) include India, Malaysia, North Korea, and, importantly, Japan, Duggan said at a meeting entitled The Y2K Bug: Threat to Business Community, held in Singapore today.

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"Because of the size and importance of its economy, Japan's lack of Y2K readiness could cause major problems to ripple out," he said.

Also important is the presence of China in Level 4, where 66% of companies are expected to suffer a mission-critical failure. China's extensive and growing trade links could cause year 2000 problems for its neighbors, Duggan said. The remaining Asian countries in Level 4 include Cambodia, Indonesia, Laos, Pakistan, the Philippines, Thailand and Vietnam.

Non-Asian countries whose lack of year 2000 readiness could have regional impacts include Germany (Level 3) and Russia (Level 4), Duggan said.

Duggan said there is also considerable variation in year 2000 readiness in different industry sectors. The private sector is generally better prepared than government; large businesses better prepared than small business; and the financial sector better prepared than engineering, transport, services or construction industries.

Singapore is an exception, with a well-prepared government sector but a woefully unprepared small and medium-size enterprise (SME) sector, according to Toh See Kiat, chairman of local company CommerceNet Singapore Ltd.

"We know that of around 92,000 SMEs in Singapore. Less than 100 have applied for a government grant to help with their Y2K problems," he said at the conference. "The problems are ignorance and fears that consultancy could be expensive and that consultants are playing up the Y2K problem for their own benefit."

But the economic problems in Asia have not hit year 2000 projects, according to Duggan.

"Y2K budgets have generally come through undamaged, while longer-term advances such as E-commerce infrastructure have been delayed," he said. "Not enough is still being done about Y2K, but no less is being done than before."

One hopeful sign is that year 2000-prepared banks and large multinationals are beginning to put pressure on their smaller business partners to become year 2000-compliant, even to the extent of removing them from preferred supplier lists if they don't comply, Duggan said.

Overall, Gartner believes that the year 2000 problem won't cause the global business meltdown that some analysts have predicted, but that it will cause a negative impact on the world economy that will be felt for three to five years.

Y2K corporate failure rate predictions by country

Level 1 (15%): Australia, Belgium, Bermuda, Canada, Denmark, Holland, Ireland, Israel, Switzerland, Sweden, U.K., U.S.

Level 2 (33%) Brazil, Chile, Finland, France, Hungary, Italy, Mexico, New Zealand, Norway, Peru, Portugal, Singapore, South Korea, Spain, Taiwan.

Level 3 (50%): Argentina, Armenia, Austria, Bulgaria, Colombia, Czech Republic, Egypt, Germany, Guatemala, India, Japan, Jordan, Kenya, Kuwait, Malaysia, North Korea, Poland, Puerto Rico, Saudi Arabia, South Africa, Sri Lanka, Turkey, United Arab Emirates, Venezuela, Yugoslavia

Level 4 (66%): Afghanistan, Bahrain, Bangladesh, Cambodia, Chad, China, Costa Rica, Ecuador, Egypt, El Salvador, Ethiopia, Fiji, Indonesia, Kenya, Laos, Lithuania, Morocco, Mozambique, Nepal, Nigeria, Pakistan, Philippines, Romania, Russia, Somalia, Sudan, Thailand, Uruguay, Vietnam, Zaire, Zimbabwe.

Y2K corporate failure rate predictions by Industry:

Level 1 (15%): Insurance, Investment services, Banking, Pharmaceuticals, Computer Manufacturing

Level 2 (33%): Heavy Equipment, Aerospace, Medical Equipment, Software, Semiconductors, Telecom, Retail, Discrete Manufacturing, Publishing, Biotechnology, Consulting

Level 3 (50%): Chemical Processing, Transportation, Power, Natural Gas, Water, Oil, Law Practices, Medical Practices, Construction, Transportation, Pulp & Paper, Ocean Shipping, Hospitality, Broadcast News, Television, Law Enforcement

Level 4 (66%): Education, Health care, Government Agencies, Farming & Agriculture, Food processing, Construction, City & Town Municipal Services.

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