Leaders in the Bug Battle

To respond to the potential Y2K crisis in industry, in August of last year the Ministry of Economic Affairs (MOEA) instructed the Industrial Development Bureau (IDB) to set up a "service team," bringing together the Institute for Information Industry, the Industrial Technology Research Institute, the Corporate Synergy Development Center and other organizations, to mount a concerted effort to assist manufacturing industry in tackling the millennium bug.

Because time is so short, and in view of enterprises' differing scales of operation, levels of willingness to cooperate and financial resources, the prospects for getting all of Taiwan's more than 82,000 manufacturing firms through Y2K without problems already look bleak. The target which the IDB is currently setting itself is to "assure 75% by value of industrial production," to try to minimize the millennium bug's impact on national competitiveness.

Starting from the core

David Chi, director of the IDB's Y2K office, says the team initially focused its efforts on 132 raw materials producers and other major companies-in sectors such as iron and steel, petrochemicals, man-made fibers, information technology and semiconductors-which account for 35% by value of Taiwan's industrial output.

"If supplies of raw materials dry up, this will shut down all the downstream processors. This knock-on effect is very important," explains Chi.

Their next main target was 500 core industry firms including listed companies and leading firms in various industries; in the third phase they expanded their focus further to a total of 5000-plus key companies (medium and large companies with an annual output value over NT$100 million).

In order to understand these companies' present level of response, last year the IDB individually visited over 600 firms in order of their production value. They discovered that the vast majority were already taking action, but that they still differed greatly in their attitudes towards the problem.

Since January this year, industry associations in various sectors have begun to urgently mobilize companies to engage in "horizontal" cooperation; at the same time, the Corporate Synergy Development Center, which gives firms long-term guidance on setting up core-periphery relationships with their suppliers-has continued to reinforce the "vertical" links between upstream and downstream processors, with the aim of building a Y2K assistance network into which it hopes to rapidly integrate the 5,000-plus firms targeted by the service team.

A concerted campaign

According to a mid-January survey by the IDB of its 5,000 key manufacturers, out of nearly 4,000 companies which replied some 18% stated they had no Y2K problem; 20% were still drafting plans; and the remainder were investigating the problem, were making modifications, were testing modifications already made, or-in 7% of cases-said they had already completed their response.

Since there is still some time left before the start of the year 2000, it is understandable that only a small number of companies have so far completed their preparations for Y2K. What is more worrying is the fact that as many as 38% of firms do not believe they have a problem, or are only at the planning stage.

"Even people's home computers may crash, so when a company with an annual output worth over NT$100 million thinks it has no problems on this score, can it be believed?" asks a member of the service team. Currently the team is conducting audits and confirmation work with these companies in the hope of using the remaining time for a last-ditch effort to get them adequately prepared.

As well as focusing on key companies, the service team has set up a "panel of experts" which can provide companies with free advice online, by telephone or by fax, in order to avoid denying help to small and medium enterprises (SMEs), which have the least resources of their own. Industry associations are also actively organizing presentations to give guidance to companies, and have recorded many videos to teach firms step by step how to eliminate the millennium bug. In this way they hope to reduce the amount of time wasted by companies having get to grips with the problem on their own.

The total cost of responding to Y2K by modifying and upgrading information systems and replacing factory equipment may turn out to be very high. For instance, Yulon Motor Company has spent NT$300 million on its 22 computer systems alone. To soften the blow for companies, expenditure on combating the millennium bug threat can now be written off as "research and development investment" under the fiscal incentives regulations, thus greatly reducing the burden. To further encourage companies to tackle Y2K, the MOEA also provides low-interest loans at rates of only about 2%.

Of course, as well as carrots there also have to be sticks. Today when companies apply for any government assistance or accreditation, such applications for shares to be listed on the stock exchange or traded over the counter (OTC), to import foreign labor, for SMEs to receive assistance with R&D projects, or for guidance in setting up core-periphery operations, they have to report on their progress in responding to Y2K as one of the conditions for approval. The Securities and Exchange Commission is also doing its bit by requiring listed and OTC-traded companies to report monthly on their Y2K progress and to make this information publicly available for the benefit of investors. The commission does not rule out punishing companies whose slow response puts them at risk of disruption to their operations next year by suspending trading in their shares.

The government has introduced this system of incentives and sanctions because it has to do all it can to lead industry in winning this war. "We welcome any enterprise which has the determination to face the Y2K challenge to join us on the battlefield!" says David Chi.

The IDB's Y2K website is at www.y2kmfg. gov.tw