- SYDNEY (www.nando.net) - The failure of companies to realign their computer
systems to combat the millennium bug will force a worldwide recession which
could cost up to $600 billion to correct, experts warned Friday.
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- "Based on the progress companies
are making, I think the world is headed for a recession in 2000,"
said Maurice Newman, chairman of the Australian Stock Exchange.
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- As many as 20 percent of the world's
companies could crumble, he said, due to glitches in electronic systems.
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- "I think that you would have to
be optimistic to believe there will not be a significant detrimental impact
on the world's and individual economies."
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- The millennium bug threatens to crash
electronically controlled systems worldwide, including banks and traffic,
when computer clocks click over from 1999 to 2000.
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- The problem arises because most computer
software uses only two digits to specify the year.
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- This means 2000 will appear as 00, which
may be interpreted as 1900, throwing a range of computer operations into
chaos.
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- "If you run a car making plant and
a couple of suppliers of integral parts fall over with just-in-time inventories,
the likelihood is that you are going to stop your production line and start
laying people off," he said.
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- "There will be a chain reaction."
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- One of the world's foremost authorities
on the 2000 software problem, Deutsche Bank chief economist Edward Yardeni,
said there was a 60 percent chance of a severe global recession lasting
12 months.
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- "He is by nature quite an optimistic
economist," Newman, also chairman of finance house Deutsche Morgan
Grenfell, commented in an interview with Business Review Weekly.
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- The most thorough research yet into the
world's preparation to counter the issue, due to be published in April,
shows the United States is the most compliant, followed by Australia and
Canada.
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- Compliancy with the issue means these
countries have begun developing software remedies to overcome the problem,
as well as IT management strategies.
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- Conducted by analysts Gartnet Group,
it details 15,000 companies in 86 countries.
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- "The rest of the world's governments
are considerably behind," it says, according to Business Review Weekly.
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- With the problem costing billions of
dollars to fix, Gartnet, in an ominous warning, says: "Several countries
are going to be pushed over the edge."
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- Thailand, the Philippines, Venezuela
and Central Africa are at the bottom of the scale, with less than 5 percent
of companies currently compliant.
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- Malaysia, Taiwan, China, Russia and Germany
fare little better.
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- "How can you not have a worldwide
recessionary effect?" Gartnet research director Lou Marcoccio told
the magazine.
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- "We are all going to have to pay
the $300-600 billion bill to fix this problem."
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- A recent analysis by Standard and Poor's
indicated the year-2000 issue could cut half a percentage point from U.S.
growth in 2000 and early 2001.
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- "That would be the same size as
the expected economic damage from the turmoil in East Asia," it said,
as information technology expenditures and resources are diverted to "patching
up old programs."
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