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Wednesday, 17 November, 1999, 22:05 GMT
US 'prepared for Millennium Bug'
three US government officials US Government officials say Y2K will not derail economy

By BBC News Online's Kevin Anderson in Washington

The Y2K computer glitch, or Millennium Bug, will not even slow the US economy - much less cause a recession - according to a report released by the US Commerce Department.

"We absolutely reject the forecast of a Y2K shock of anything like the dimensions required to derail US economic growth," said Robert J Shapiro, under secretary of commerce for economic affairs.

And Secretary of Commerce William M Daley predicted that in February 2000, the US would celebrate the longest economic expansion in the nation's history.

Health care and small business vulnerable

As the government reported in its final quarterly review of Y2K preparedness last week, most critical sectors of the US economy are prepared, including energy, finance, telecommunications and transportation.

This does not mean that there will not be disruptions. The government is less confident about the preparedness of small businesses, both in the US and abroad, and the education and health care sectors.

"It would be surprising if Y2K problems in these areas do not make news in early January," Secretary Daley said.

Many small businesses have adopted a "fix on failure" strategy, according to John Koskinen, the head of the President's Council on Y2K conversion.

Mr Koskinen warned that this may cause a crush of small companies seeking patches and updates to repair their systems in the first weeks of January.

Smaller hospitals also might see difficulties particularly in their billing and patient management systems, Mr Koskinen said.

With changes in the health care industry in the US, these smaller hospitals and health care facilities have very small margins of cash flow cushions, he said.

"If they have trouble with their reimbursement process in January, either from (the federal programmes of) Medicare or Medicaid or private insurance companies, they're going to quickly find themselves in a very serious financial problem," he added.

International effect minimal

Another area of concern has been the possible knock-on effects for the US economy from international disruptions.

John Koskinen, head of the President's Council on Y2K Conversion John Koskinen says businesses adopted "fix on failure" strategy
While developed countries generally have a high level of preparedness, some developing countries and more developed countries could experience serious disruptions.

At the release of the final quarterly report on Y2K preparedness, Mr Koskinen warned that companies with business in developing countries had contingency plans to minimise the impact.

Most of the United State's major trading partners are well prepared.

And while China, Russia and some countries in eastern Europe could experience significant Y2K disruptions, these countries do not pose a significant economic risk to the US.

US exports to China in 1998 represented only 2.1% of the United States' total exports and only 0.2% of GDP.

Russia, which may be uniquely unprepared for the computer rollover, poses even less of a risk to the US, the report said. Exports to Russia through August 1999 accounted for less than 0.2% of total US exports and an insignificant share of GDP.

Fighting ignorance with information

More difficult to predict is the behaviour of people, and the report said that "false expectations about the Y2K problem, if widespread, could affect a national economy."

But, "neither exaggeration or complacency appear to be a problem for the United States," the report said.

To help provide information to the public, the government unveiled a $50m Y2K information centre on Monday that will compile information about the impact of the computer glitch from around the world.

The centre will provide that information through its website and a toll-free telephone service.

The centre will be "the one place in the world with the most complete information," he said, but added: "We hope that night will be really boring."

$100bn price tag

The US has spent more than $100bn preparing for the computer glitch, Secretary Daley said.

"That is about $365 for every American man, woman and child. Obviously, this is a lot of money, but the potential cost, as we all know, of not doing anything was far greater," he said.

Y2K spending in the US peaked in 1998 with more than $32bn spent to identify and repair affected systems. Spending was down slightly this year to $29bn and is expected to drop to $5bn by next year.

"The good news is that the biggest costs are behind us," Secretary Daley said
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See also:
16 Nov 99 |  Sci/Tech
Korea and China to fly Y2K test
10 Nov 99 |  Americas
Clinton: Y2K will not bug US
05 Nov 99 |  Sci/Tech
Europe's Y2k 'blacklist'
10 Aug 99 |  Northern Ireland
Airline 'grounded' for New Year

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