The Millenium Bug: Can the Middle East Handle the Virus?
According to a World Bank expert, the sad truth is that on January 1, 2000, most of the developing countries will have yet to solve their computer problems. The damage from this negligence will fall on the states themselves, their neighbors, and their commercial partners. Only 35 percent of the world’s 139 developing states have implemented national schemes to explore the effects of the millenium bug, which implies that most of these nations believe that they will be unaffected by the predicament. Experts, however, contend that this bug will affect every country that uses computers. In the Middle East, for example, most water desalination plants work on computers, and oil-drilling equipment is also dependent on computer technology. Every other aspect of life, such as the food supply, energy and transportation, depend on computers.
Only in the past year have most Mideast countries began establishing national committees to deal with the millenium bug and to crystallize emergency plans to cope with its possible detrimental effects. Most states have created sufficient working plans to monitor the effects of the bug on communication networks. Some countries have already signed contracts with companies to replace the components that would be affected. Mideast countries have also been cooperating with the International Telecommunication Union and relevant technology firms to develop appropriate technical solutions to this problem. Only time will tell whether the region’s states have prepared sufficiently for the millenium, or if they will suffer for their indifference.
Efforts of Individual States to Prepare for Y2K
At the beginning of this month, the Bahraini government announced that it had upgraded all computer programs at ministries and other government institutions to deal with the date transformation in 2000. The Bahrain Monetary Agency (BMA), the island’s central bank, issued a stern warning to banks and other financial institutions that they had to be ‘2000 compliant’ by June 30, 1999. In the second quarter of 1999, the BMA will host a seminar for financial institutions, which will address the issues of the 2000 problem. These topics are especially significant for Bahrain, which is the Gulf region’s main financing and banking hub, with over 100 financial institutions operating.
In late last month, the Tel-Aviv Stock Exchange (TASE) announced that the first series of Y2K compliance testing between member firms and the TASE showed positive results. The TASE had already been using a Y2K-dedicated testing environment, which is shared with participating banks and brokerage firms. Modifications of TASE internal systems were already complete during 1998. The Exchange’s most updated version of core systems was set up in the late 1980s, taking the Y2K issues into consideration. New regulations, approved by the Ministry of Finance and the Israeli parliament, require all traded companies, mutual funds and portfolio managers to report their Y2K preparations in their annual reports. The regulations established a unified reporting framework, providing full disclosure as required by Israeli securities law.
Bank Leumi will allocate a total of $50 million to prepare for the Y2K bug, the largest sum earmarked for this purpose in the Israeli economy. The Bank spent NIS 55.7 million in 1997 and approximately NIS 54.5 million more in 1998 on this dilemma. In contrast, the board of directors of Bank Hapoalim is anxious as to how the bank’s management and professional bodies have been dealing with the Y2K problem, and has consequently sought three independent opinions on the issue.
Israeli society, however, may not be completely immune from the 2000 problem. A May 1998 report by the Israeli treasury indicated that ministries will not have adequate time to overcome the problems in computerized systems such as traffic lights, telephone exchanges, operational equipment in power stations and medical equipment. The report also stated that the project on how government ministries will adapt information systems would not be completed on schedule.
A feeling of panic is developing in Egypt with regards to how the millenium bug will effect Egyptian society. Since all major activities in Egypt are controlled through computers, it will face serious consequences, since the computer systems currently in place are not programmed to deal with this perplexity. According to Major General Ihab ‘Alawi, Director General of the Mobilization and Statistics Agency, Y2K is “the mother of all problems” for all sectors that deal with computers. The state should thus cooperate in finding solutions, because it is an intertwining problem affecting all sectors of society. It is not only an “information technology” problem but also a senior management difficulty.
Several Egyptian banks, including the National Bank and Commercial International Bank, have dealt with and have overcome the Y2K problem. Many other banks, however, have neglected to confront the question. This could pose a serious challenge for the Egyptian banking system and its transactions with banks abroad. If the enigma is not completely resolved, the application systems will be paralyzed and the correspondents’ files and transactions will disappear in the year 2000. Similar developments would occur to programs that monitor repayment installments, contracts, purchases, and the clients’ ability to service and repay their loans.
In June 1998, former Prime Minister Rafiq al-Hariri issued a directive asking officials in charge of public departments and offices to take the necessary measures to tackle the Y2K problems expected in computer systems. Earlier in May, Central Bank Governor Riyadh Salamah issued circular No. 1623, containing Decision 6960 regarding the risks to banking information systems in 2000. The decision obliged all banks and concerned institutions to form a committee to solve the Y2K computer problem. According to this plan, the committee must fully test the operating systems, networks, and programs, and carry out various calculations to ensure that the systems work in a sound manner by June 1999.
Y2K repercussions in Morocco may not be as severe as in other more developed nations, since its dependence on computer systems lags far behind other countries. Yet, the North African nation is bound to face serious consequences, since Moroccan authorities have declined to take this problem seriously and have hesitated to mobilize the necessary resources to encounter the situation. Morocco’s national aviation carrier, Royale Air Maroc (RAM) has been aware of the potential uncertainty, and back in 1996 established a working group, “Task Force 2000”, in charge of computer applications and exploitation systems and equipment. RAM has adjusted its central computer system to be 2000-ready, at a cost of $1 million. Carrier officials insist that whatever the cost to mend the situation, it is “insignificant” compared to the damages that would be caused by the expected “computer crash.”
While the efforts of various Mideast states to repel the millenium bug have varied in degrees of commitment, the region has generally failed to engage upon a serious project to prepare their national technology infrastructure for Y2K. Most Middle East companies have yet to tackle the bug in earnest, and they will need to direct sizable budgets to the issue if it is to be resolved in time. It is estimated that up to 60 percent of regional companies are not pursuing a Y2K project, even at this late stage. A majority of entities remain complacent about the possible dangers. Even those companies that do have programs may find it hard to complete them in time. At this point in time, it appears likely that the region’s negligence will induce wide-scale damage.
© 1999 Mena Report (www.menareport.com)