Even if the U.S. were 100% y2k compliant in 2000, we will still be in a crisis if our trading partners are not compliant. This was Tony Keyes' testimony before the House Subcommittee on Technology on November 4.
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This one recent event is the strongest evidence to date that solving the Year 2000 problem is one we must address as a global community. Even if by some miracle the US were to achieve 100% compliance by January 1, 2000, it would all be for naught, if our trading partners fell significantly short of that goal. Even if all of us around the world managed to complete our work on time, we risk creating an electronic ‘Tower of Babel’, if we do not agree on standards and test the interoperability of our converted systems.
The reality of our current circumstances is truly sobering. Almost no one believes that the US will enjoy 100% success in converting our government and private sector infrastructure on time. The Horn committee recently issued its second report card to federal agencies, for their progress on defusing Y2k. While there was some improvement, there still were eight agencies with D’s. The truth is beginning to sink in that we are facing a task of gargantuan proportions, rife with complexities and obstructed by our fear of litigation and personal reprisal. Now we recognize that the problem not only exists in large mainframe computers, but rather, it can be in any device at all which contains a microchip. That means over 250 million PC’s, and billions of embedded chips, worldwide. We stayed in denial too long, spent too little and delegated responsibility for solving the problem to the point where triage and contingency planning are now every bit as important as remediation.
By most accounts, we are ahead of most other countries in our race against the clock. Reports issued over the last thirty days show that many of our largest trading partners are six to eighteen months, behind us. For example:
The office of the Auditor General for the Canadian government issued a report last month on the status of Year 2000 remediation there. The report said, "urgent and aggressive action is needed" to solve this problem on time. "It may already be too late to avoid failures in some critical systems", the report went on to say. Canada is our largest trading partner, and our number two supplier of oil. Their failure to conduct business as usual would weigh significantly on our economy.
Japan our number two trading partner is already in the midst of a recession. Their banks have been fighting to maintain solvency. Surely more will fall as a result of the breakdown in the Asian marketplace. Morris Goldstein of the Institute for International Economics here in Washington said that, "[Japan] was set for a truly world-class banking crisis". Our financial community here in the US is becoming increasingly concerned by the lack of assurances they are getting from Japanese banks that they will be ready in time.
The Mexican government, our third largest trading partner, appointed a Year 2000 task force just two weeks ago, "to look into the problem". They had their first meeting on October 30th. The private sector there has just begun to talk seriously about the problem.
A recent survey conducted in the UK and sponsored by Cap Gemini indicated that ten percent (10%) of businesses would fail to meet the Y2K deadline. As some in this group are very large businesses, nearly thirty percent (30%) of the country’s GDP would be threatened. Small and medium size enterprises are of particular concern as they remain complacent, in spite of the fact that demand will exceed supply for skilled labor by April of 1998, according to a story which appeared in PA News.
Germany, France and Italy are trailing the US significantly in their efforts to address the issue. In fact, the entire European community is behind in their work as most of their time and resources has been focused on the significant challenge of converting to a single currency by the turn of the century.
In Australia, The RBA (similar to our Federal Reserve Bank) has said, "many banks do not seem to have a good feel for the size of their [foreign exchange] settlement risk". The RBA expressed concern that so much of the work remains uncompleted.
From the standpoint of political instability and environmental safety, Russia may pose the greatest threat. Last month I was asked for help by a private, US based foundation, known as the Dupuy Institute. They were working at the behest of former Soviet President Mikhail Gorbachev to raise private funding here in the US to address the Y2K problem in Russia. Mr. Gorbachev knew that Y2K wasn’t getting the kind of attention it deserved. Unfortunately, Mr. Gorbachev ultimately decided not to pursue his original agenda, and the problem still exists. Many worry about Russia’s vulnerable nuclear power plants, its largely unpaid military, and the world’s dependency upon the country’s natural resources.
Even though we are behind in our efforts and we are still attempting to increase the sense of urgency among government and private sector officials, we must not ignore the rest of the world. To that end, I respectfully ask the President to appoint a US, Y2K Czar, and use the power of his office to call for an international, Y2K working group to be established. The Y2K Czar would have full authority to direct the remediation effort in the federal government and to assure that our vital industries make the conversion successfully. He or She would also represent the US at the international working group.