World Bank to Lend US$100M For Y2K Remedy

Posted on February 1, 1999 
Filed Under Julian, Nikkei Electronics Asia

Malaysia is seeking World Bank funding to remedy its year 2000 (Y2K) problem, but experts fear it may already be too late.

World Bank spokesman Graham Barrett confirmed the government was now applying for a loan specifically to address the Y2K problem which will only likely be approved in early 1999.

The allocation is believed to be in excess of US$100 million.

The application followed the government’s admission recently that it may have underestimated the complexity of the date rollover problem.

An initial allocation of about US$8 million to tackle the Y2K bug for the public sector was deemed “inadequate” and was raised to US$26.3 million in October 1998.

Y2K consultants and solution providers, however, scoffed at the figure which they said was “too small” to address the massive remedial programming required for the various government ministries and departments, many of which still use legacy systems.

The federal government employs over 875,000 staff.

A government source says the national Y2K steering committee is now working on a crisis contingency plan to ensure essential services continue even if efforts to remedy the problem fail.

“Given that the time for testing may be inadequate, it hopes that at least critical functionality is prioritized, particularly in the power, water, telecommunications and the oil and gas sectors,” he said.

New Airport Problems

The move follows recent revelations that the new Kuala Lumpur International Airport opened in June 1998 is not fully Y2K-compliant.

“Fortunately, the problem is not too extensive as the computer systems there are very new,” said Malaysia Airports Sdn Bhd general manager Muhammad Adnan Yahaya.

He added a team of foreign experts had been hired to rectify the problem.

Adnan hopes the airport and four other major airports in Penang, Langkawi, Kuching and Kota Kinabalu, and 32 smaller airports around the country will be compliant by September 1999.

In the private sector, the situation was no better. A Securities Commission report recently indicated that only 93 companies or 12.7% of 734 companies listed on the Kuala Lumpur Stock Exchange were currently Y2K-compliant.

The official national registry of Y2K-compliant companies, which was set up in May 1998 on the Internet at www.y2k.gov.my, has yet also to register a single company.

On the banking front, most financial institutions have indicated that they are moving toward completion of their individual company-wide Y2K projects.

A mid-1998 survey conducted by Merrill Lynch & Co Inc to gauge Y2K readiness of banks in the Asia-Pacific region concludes that banks were generally well-prepared despite the economic slowdown.

Six major banks in Malaysia, it stated, are spending US$67.3 million to tackle the problem, and they will be compliant between December 1998 and June 1999.

But the survey failed to acknowledge that Malaysia’s banking industry is in a state of unusual flux with restructuring and absorption by parent companies. Some have very high levels of debt and a flurry of mergers is expected in 1999.

Experts point out that mergers will make it difficult to implement and integrate disparate Y2K strategies.

Consultant Kenny Tay of Finet Associates Sdn Bhd said banks and financial institutions must also consider the credit risk posed by borrowers who still think that the Y2K problem is a technical issue and not a business issue.

He urged banks and financial institutions to encourage borrowers to resolve the problem to minimize the potential threat to their own loan portfolios.

For customers, the possibility of glitches causing chaos in the banking system in 2000 is a frightening and real possibility. “Although it is unlikely that the banking system will grind to a halt in Malaysia, service is expected to be far from perfect with delays in clearing checks and transferring money internationally,” an expert said.

The economic crunch make matters worse for ailing companies already struggling to keep their businesses afloat amid a recession, the country’s first in 13 years.

“Most companies have not budgeted for Y2K solutions and are reluctant to acknowledge that the expense is unavoidable, and the deadline is non-negotiable,” said Billy Chia, managing director of Y2K solutions provider Future Connections Sdn Bhd.

He said the problem is exacerbated by lack of public awareness and general apathy by some smaller companies that still do not see the date roll-over problem as critical to their businesses.

He estimates that 80% of Malaysia’s small and midsize companies running older generation PCs, up to speeds of 100MHz, are affected and may need fixes.

Published in Nikkei Electronics Asia, Feb 01, 1999
by Julian Matthews, Malaysian correspondent

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