Both the UK and the US markets are more vulnerable to year 2000 disruptions than emerging countries ...
Both the UK and the US markets are more vulnerable to year 2000 disruptions than emerging countries as a result of their high level of dependency on technology.
Although emerging markets are doing the least to prepare for the millennium bug, they are still the least vulnerable, according to research from Goldman Sachs.
Martin Brookes, global economist at Goldman Sachs, said: "The potential for economic disruption arising from computer failures is great. No one knows with any certainty the true risks from the millennium bug to natural economies but there is increasing concern that some countries may be more vulnerable.
"In recent weeks, attention has shifted towards emerging markets as a source of possible economic turmoil.
The reason for this is the increasing number of reports stating that many countries are not on course in fixing their computer problems and as such trade could be severely disrupted in some countries.
The economies with the greatest vulnerability are those with the highest concentration of information technology capital. A country with a large stock of IT capital would be a worry for investors if it was accompanied by a low level of preparedness.
IT consultants, the Gartner Group, has graded countries according to their year 2000 preparations with the position of both government and private sector institutions incorporated in the analysis.
Those least prepared are ranked one up to the most prepared at level four, with the US and UK both topping the list at level four.
According to Goldman Sachs calculations the US has 20.3% of its total capital stock consisting of IT capital, making up 42.1% of its GDP. The UK has 17.7% IT capital consisting of 35.2% of GDP.
This compares with Thailand which has an IT capital stock percentage of 1.7% accounting for 5.5% of its GDP.
At the same time Thailand is only ranked one on the Gartner Group rating list, along with Indonesia and China.
Brookes said: "The result is countries that have the greatest potential for economic disruption are also the countries that are deemed to have made the most progress. At the same time those lagging in terms of fixing problems are countries that have the least exposure to IT problems.
Emerging markets feature further vulnerability because of the effect any investor panic will play on their currencies.
If investors were to change asset allocations in emerging markets as a result of year 2000 concerns, Indonesia would look vulnerable among Asian countries, whereas India, Malaysia and Taiwan would look relatively comfortable, according to Goldmans.
These latter countries are better off because they have little short-term external debt and are relatively advanced in millennium bug preparations.
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