When the chips are down
Anxious pundits predict the Y2K bug will trigger a second
economic meltdown in the region, writes PETER ALFORD.
26dec98
IMAGINE that in 12 months,
just as the battered East
Asian economies begin to
right themselves, they are
knocked over again by a
second recession.
Suppose China stops being a
regional sheet anchor and is
engulfed by the new
emergency. Think about the
social chaos in Indonesia
today and then picture that
kind of havoc breaking out
elsewhere as impoverishment
sweeps across the region for
the second time in three
years.
Imagine, finally, that the
storm waves from this next
Asian crisis don't lap relatively
harmlessly on Australia's shore
but break over us with full force. This, rather than the millennialist
panic stories about planes falling from the skies and electricity grids
collapsing, is the kind of scenario that keeps year 2000 experts awake
at night.
East Asia, a region with more than one-third of the world's population,
one-quarter of its manufacturing capacity – and, to be selfish about it,
most of Australia's markets – is uniquely exposed to the millennium bug.
All the region's developed and semi-developed countries, except
Singapore, are running at least six months behind Australia and the
handful of other leading countries in Y2K preparedness. With barely 12
months to run to the critical date – plus the fact Y2K problems will
start snowballing from midyear as computerised systems begin routinely
looking into the 1999-2000 financial year – that could prove to be a
fatal gap.
We've had fair warning of the ramifications, says Phil Dodd. The 1997
Asian currency crisis, which has cascaded into emerging economies
everywhere and at one point drove the Australian dollar down to US55c
for no apparent reason except proximity, illustrates the hazards of
worldwide interconnectedness.
What we face is much more dangerous, says Dodd, who heads the
Unisys Asia-Pacific year 2000 project. Left uncorrected, the elementary
but incredibly pervasive programming glitch that is the Y2K bug will
affect not just capital flows but banking systems, physical trade,
information transfers, energy supplies and transport.
"To me, the currency crisis is a precursor, a warning," he says. "It's the
tremor before the earthquake."
The East Asian problem has two sets of ramifications for Australia. In
the short run, Y2K-related breakdowns in Asian hub cities could disrupt
telecommunications links, air transport and shipping. These problems
might take several months to overcome.
In the long run, the really worrying prospect is that cascading Y2K
breakdowns in banking systems, communications, electricity and other
utilities will plunge the region into a second recession – a recession that
may be worse than the current one.
The economic crisis in Indonesia, South Korea, Thailand, Malaysia, The
Philippines, even Hong Kong, is one reason East Asia is so exposed to
the bug.
Engrossed by week-to-week survival during the past 18 months, most
industries and governments, until about six months ago, had given only
distracted attention to Y2K rectification.
China's approach is similarly under-developed and even Taiwan, with its
sophisticated information technology industries, is in poor shape.
Japan, the second largest and second most technically advanced
economy, is especially worrying: "Large parts of corporate Japan,
including the banks, still seem to be in denial," says one analyst.
Y2K programs are the only technology expenditures that have been
maintained throughout the region during the Asian recession, says
Gartner Group's Hong Kong research director Joe Sweeney, but they
were belated and badly under-funded at the outset.
Gartner's next status report on international Y2K preparedness will show
every economically significant East Asian country except Singapore still
in what Sweeney describes as "the danger zone".
Gartner, a Connecticut-based consultancy that has been a leader in
raising Y2K awareness, has identified a new hazard: the "Y2K speed
bump".
Sweeney says there is clear evidence most customers in developed
countries, recognising East Asia's dangerous unpreparedness, are
planning to order extra goods and materials next year as several
months' buffer against supply failures in early 2000.
...
theaustralian.com.au |
