April 19, 1999
Cover

THE WORLD OF Y2K

BY WARREN CARAGATA

The place not to be on New Year's is Moscow's Red Square, or anywhere else in Russia for that matter. While predictions of computer-generated doom in Canada and the United States may be easily brushed aside, few experts are dismissing out of hand the expectations of serious problems in the world's largest country. As late as last summer, an official in the Russian government's nuclear power ministry was saying that any Y2K computer problems would be fixed as they came up in the year 2000. But this year, waking up very late to the extent of the problem and with the economy in tatters, Russian officials are seeking at least $3 billion in international aid to fix their computers.

Countries that are far less prepared than Canada are the Achilles heel of the Y2K repair effort. Experts worry that computer failures in other lands will spread quickly as international trade breaks down. In Canada, this means companies could lose export markets and find vital raw materials in short supply. Lou Marcoccio, the Y2K research director of U.S.-based GartnerGroup, a large consulting firm with an extensive international Y2K practice, says problems can easily jump borders. For instance, Russia's gas industry is far behind in fixing its computers and that raises concerns about western Europe, which gets much of its natural gas from Russia. Nancy Stiles, the official responsible for Y2K issues at the foreign affairs department in Ottawa, describes the global implications as "very serious." "It's clear that an awful lot of countries are late in recognizing this as a problem," she says, "and it's not just Third World countries."

Peace and security could also be threatened. Again, Russia looms large. Russian and U.S. officials have been meeting to discuss ways to lessen tensions on New Year's Day if Russia's defence warning systems do not work. At other world trip wires -- such as Iraq and North Korea -- international observers are concerned that Y2K failures could be used as a cover for attack.

Generally, the richer and more industrialized the country, the more prepared it is for the Y2K rollover. Surprisingly, important countries such as Japan, Germany, France and Italy are lagging. Marcoccio and others dismiss the view that many developing nations will escape problems because they are far less dependent on technology. Even countries with few computers have automated key parts of their economies. That means, come next year, there will be few places to hide.

Y2K WORLD MAP

TOP RANK: The United States and Canada are the most prepared of all countries. Others in the best group include Britain, Sweden, Denmark, Switzerland and the Netherlands.

BRAZIL: Brazil is the world's eighth-largest economy and, while it doesn't rank at the bottom of Gartner's scale, it is very dependent on technology and far behind. The antiquated Brazilian phone system is expected to be a problem.

CHINA: Hong Kong is doing relatively well, but that's as good as it gets in China. In other regions, "they basically have done nothing," Marcoccio says. The widespread use of pirated software is a problem -- it is difficult to demand a Y2K-compliant version of something stolen. U.S. congressional testimony indicates possible power, phone and banking failures.

EUROPE: Germany is one of the western European countries where Gartner expects problems, although it is starting to catch up. The German central bank has given financial institutions a late deadline of July 1 to finish Y2K work, admitting that preparations for the euro currency had been a greater priority. France and Italy are also behind.

JAPAN: Japan has started to catch up, with big companies making strides, but some banks and smaller firms are far behind, Marcoccio says. There will be problems, but they are not expected to be catastrophic.

OIL PRODUCERS: U.S. intelligence sees potential problems among many oil-exporting countries. Indonesia, Russia, Saudi Arabia, Kuwait, and Venezuela all rank in Gartner's high-risk groups. Problems with ocean-bound shipping could also hamper the movement of oil to market.

PANAMA CANAL: Ships will not be allowed into the canal on Dec. 31 and operators of both the Panama and Suez waterways say operations could be disrupted by failures of traffic management systems or ships disabled in the locks by faulty engines or steering controls.

RUSSIA AND UKRAINE: The combination of Y2K failures and economic problems could mean "major humanitarian consequences" for Russia and Ukraine, according to the U.S. National Intelligence Council. There could be widespread electrical blackouts and Russian and Ukrainian officials cannot guarantee nuclear reactors will function. The Ukrainian power grid is fragile and the government seems unprepared for a failure.

SOUTH AFRICA: The country stands out because, unlike other African countries, it has a higher dependence on technology and yet is far behind in fixing its systems. Expect some serious failures, Gartner warns.

SOUTHEAST ASIA: The region's economic crisis has slowed Y2K efforts as spending has been slashed. In Indonesia, technology budgets have been cut by 80 per cent. In the Philippines, only four of 52 banks were Y2K-ready as of the end of last year and the central bank says it will shut institutions that are not ready by Dec. 31. Malaysia and Thailand are behind but making gains.

VENEZUELA: Venezuela is a major oil exporter, and a large supplier of crude to Canada's East Coast. It is "way, way behind," says GartnerGroup's Lou Marcoccio.

TOP 10 SOURCES OF CANADIAN IMPORTS
1. United States
2. Japan
3. China
4. Mexico
5. Britain
6. Germany
7. France
8. Taiwan
9. Italy
10. South Korea

TOP 10 EXPORT MARKETS FOR CANADIAN GOODS
1. United States
2. Japan
3. Britain
4. Germany
5. China
6. Netherlands
7. South Korea
8. France
9. Italy
10. Belgium
-- Source: Statistics Canada