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The Year 2000 Bug Is a Menace, No Doubt About It

By James P. Bond,
coordinator of year 2000 operational initiatives at the World Bank
In the International Herald Tribune,
27 January 1999

It is a startling fact that by next Jan. 1 most developing countries will not have fixed their year 2000 computer problems. These threaten them, along with neighbors and trading partners, with damaging consequences.

A World Bank survey of 139 developing countries found that only 35 percent have a national plan to make systems Y2K-compliant. Last month, officials from 120 countries gathered at the United Nations to discuss the problem and agreed that their governments would assign it the "highest priority."

Having a national plan is only the first step. Carrying out such plans is costly. Wealthy countries and large companies have the funds and skilled people to immunize computers and operating software from the millennium bug. Many developing countries do not.

Or they see the threat as vague and distant. Yet many developing countries have regional sharing arrangements under which, for example, they rely on a neighbor's electrical supply which uses computer microchips and software that may not be Y2K-compliant.

Middle Eastern countries depend on computer-managed desalinization plants for water. Oil drilling rigs around the world use embedded chip systems, some of them buried on the ocean floor. Food and fuel distribution networks, health care, education and road, air and maritime links could be severely affected.

Emerging markets already weakened by capital flight could see their recovery delayed as investors steer clear of companies which are not Y2K-compliant. A worldwide interbank working group is conducting assessments of Y2K progress in six key sectors, with a view to guidance in making investment decisions. Many mutual funds are already avoiding companies that do not have millennium bug action under way.

It is in emerging markets that the capacity to fix the bug is weakest. One private-sector study found that companies in the worst affected East Asian crisis countries have cut computer spending by more than 20 percent.

At the same time, these and other developing countries risk being further undermined by a brain drain as high salaries and relaxed visa restrictions in wealthier countries siphon off qualified computer experts just when their skills are most needed at home.

The lack of interest in this issue is surprising. The millennium bug, living mysteriously and unseen within the microchips and software of the world's computer systems, could trigger a global catastrophe. The problem is technical. Most of us are reluctant to acknowledge how much we depend on technology, so political leaders have only recently been persuaded to take action.

Even if we can succeed in overcoming this resistance to accepting the problem as serious, the challenge still looms large. It is already too late for most developing countries to carry out enough Y2K preparations to avoid disruption.

Instead they should urgently devise contingency plans, identifying critical sectors and systems water, power, food, health care, telecommunications, transport, finance and trading and checking the bugs in them, while preparing backup plans should these systems fail on Jan. 1.

Estimates of what it will cost to fix the millennium bug worldwide vary greatly, but we can get some idea by analyzing what major players have earmarked for the task. Chase Manhattan Corp. is spending $363 million, and DuPont Co. $400 million, while the U.S. Education Department's projected Y2K costs are $45.5 million

The World Bank, the OECD and a handful of donor countries such as Britain, the United States, Canada and Italy, together with other multilateral development banks and international private-sector organizations, have undertaken an effort to raise Y2K awareness and mobilize technical assistance and funds to help developing countries.

These efforts are extremely modest, given the enormity of the task and the global impact of a failure to act. It is now obvious that next Jan. 1 will unleash a chain of problems that will touch everyone on the planet, with the most damaging effects hitting the least prepared, namely, governments and businesses providing services to the world's poor.

Efforts by the World Bank, the United Nations and others can support some Y2K fixing, but their most important effect should be a wake-up call to national and local governments, companies and international organizations to get involved in preemptive action now.

Developing countries must devise contingency plans for those vital systems that are not yet Y2K-immune.