United States Information Agency

  USIA Chairs International Diplomacy Working Group
in President's Council on Year 2000 Conversion

(Statement of John Koskinen, Assistant to the President
and Chairman of the President's Council on Year 2000 Conversion,
including mention of USIA's leadership role.   August 1998)

I am delighted to have a chance to describe both how the President has organized the U.S. government in response to this problem, and our efforts to reach out to those around the world, to increase the awareness about the problem in those areas as well as to provide whatever assistance we can to companies and countries as they try to deal with this problem.

I returned to the government in the first week of March of this year to chair the President's Council on Year 2000 Conversion, which was created pursuant to an Executive Order we crafted on my return establishing my positi on in the council.

Our basic way of organizing has been to then reach out across the federal government and select about 35 federal agencies to serve on that council. They represent not only the normal administrative agencies and cabinet secretaries, but, somewhat uniquely , they represent the regulatory agencies in the federal government as well. So the Federal Reserve Board is a member, the Securities and Exchange Commission is a member, the Federal Trade Commission is a member, Federal Communication Commission and other regulatory bodies are also members of the council.

The members of the council were selected by the agency heads. I met individually and separately with the agency heads of 43 different agencies to discuss the problem and to invite them to make the selection of a member with two criteria being established . One is whoever they selected as their member had to be senior enough in the organization to understand what they were doing not only internally but externally in reaching out to deal with the problem.

The second criteria was they had to be senior enough in the organization and in the agency to be able to commit the agency to activity on the spot as we move forward. As I told the council at its first meeting in April, the only words that would not be a cceptable would be, "I'll have to check on that." Because our concept for the council's operation is that we'll move through an organizing and awareness phase, of which we're nearing the end now, into a monitoring and assessment phase as we move into the first part of next year. Then based on the assessments and the information we collect, we will begin to make government-wide contingency planning decisions to put us in a position to respond appropriately as we actually move into the Year 2000 and as we move into what I call the crisis management stage.

The federal government's response to whatever difficulties may arise, either domestically or internationally, will be coordinated by the President's Council.

We have talked with the agencies in those meetings and with the council about looking at this problem as a three-tiered problem. The basic first tier is to deal with our own systems. The federal government runs some of the largest, most complicated, sys tems in the world. In fact, many of them are the largest systems in the world.

In the early sixties, the federal government was the largest user of information technology in the United States by far, and for better or worse, a number of the systems designed in the sixties and seventies are still running in many of these organization s. This is part of our challenge. We clearly need to deal with that aspect of the problem. We have several agencies that have done very well and other agencies that are still significantly challenged.

OMB (Office of Management and Budget) in the Office of the President has, on a quarterly basis, been monitoring the progress of agencies as they work through the assessment and remediation, testing and implementation of their systems. They have placed six of the 24 U.S. agencies that they are reviewing on a kind of "watch" list or "troubled" agency list. Those agencies include the Department of Defense; the Department of Health and Human Services, primarily because of its management of our Medicare processing system which processes about a billion transactions a year and puts about $220 to $250 billion a year into the health care system in the United States; the Department of Energy; the Department of Education; and the Department of Trans portation, primarily because of the focus on concerns about the Federal Aviation Administration and its ability to run the air traffic control system. The sixth agency is USAID (U.S. Agency for International Development) which, while a smaller agency tha n the others, is equally challenged because they are basically starting with a totally new management information system for running all of their programs, including their grant and development programs abroad. So our first challenge is to assure the fun ctioning of our own systems.

Secondly, we have begun to focus very carefully with the agencies on the interfaces between their systems and the systems that they relate to because even if we get our systems to run, if the systems we depend upon or relate to do not run, the programs wo n't operate. In the United States, a number of federal (government) programs are actually run and managed by state and local governments. Our Medicaid program of health care for the poor is administered by the state governments. Our unemployment insura nce program is actually run by state governments as are our job training programs and others. So in those areas, even if we're functioning, if the states can't function and can't provide the necessary data, we will have a difficult problem administering those programs, which millions of Americans depend upon.

What we have been focusing on for the first time since I returned (to government) is the third tier of the problem. We are looking beyond the federal government systems and beyond those we interface with, or exchange data with, or oversee and regulate, t o those operating in each area of an agency's public policy interest -- reaching out to those whose failure would create a problem either for the economy or for the American public. I have requested that the agencies start thinking about who beyond their normal connections they should be reaching out to.

We have basically divided the domestic operations of the United States, and actually the world, into 35 sectors, most of them along industry lines. We have a sector on power, on telecommunications, on financial institutions, transportation, etcetera. So me are defined by functional lines -- benefit payments, workforce issues -- and some are international and governmental. We have a state and local government group.

We are concerned about international areas as well. In fact, one of our working groups in the international sector is international communications or public diplomacy; a group that USIA has agreed to chair. This news conference is rea lly the kick-off of that campaign of outreach by the United States Information Agency, which we are happy to support.

Each of the sectors has a working group of relevant federal agencies, one of whom chairs that working group. As I say, USIA chairs the international diplomacy or communications working group. Other agencies, some regulatory, others administrative agenci es, chair those other groups.

As we have begun to reach out to organizations across the board, we have recognized that the international area is of significant concern to us. This is why I am here today and happy to talk with you.

Another area, a domestic sector, is small to medium-sized organizations in both the private sector and in government. We are very concerned about small to medium-sized cities and counties and even states to some extent who have not been paying appropriat e attention to this problem.

The problem that they have, and the problem that we are finding in many foreign countries, is that people are not paying attention to the problem because they think it doesn't apply to them. Most people started out, including the federal government, look ing at this as a problem primarily of application systems, financial management systems, payroll systems, other transactional data processing systems in the domain of information processing. A lot of smaller organizations, governmental, private sector, e ven countries, basically looked at the problem and decided since they were not running major large mainframe data processing operations that this was not their problem.

What they overlooked is what a lot of people overlooked three to five years ago, and that is the problem of integrated circuits or embedded chips. These are often not viewed as information processing devices, but increasingly they are all pervasive in th e operations of systems and manufacturing enterprises around the world. When we have been reaching out to counties and cities, we have tried to get them to understand that any number of different organizations and operations are now run by someone sittin g at a computer which is responding to information provided by sensors embedded in a process wherever they may be. We run everything from transportation systems to water treatment processes to power plants to oil refineries with people who are, in fact, depending upon the information that their computer system derives from chips that are embedded throughout the process.

We are concerned not only about operations and manufacturing processes, we're concerned about mobile communication networks, we're concerned about the impact of these processes on health care systems. In our country, cities and counties operate a lot of free-standing hospitals that will be at some risk.

Similarly, in small to medium-sized countries around the world, developed and developing countries, many have not focused on the fact that they are now increasingly beneficiaries of global financial networks and the exchange of data and financial informat ion on a global basis; they are tied into and rely upon international telecommunication networks; they rely on international shipping, both for exporting raw materials and finished goods as well as importing those goods from around the world.

Let me give you an example of the nature of the problem. Most large tankers and cargo ships are run by 10 to 12 people. There is no one in an engine room anymore. They all sit at a desk with computers controlling the operation of the ships. In ports, the cranes you see that load and unload cargo have, on average, 150 embedded chips in each crane. And, again, the crane is no longer run by someone with a lot of wheels and pulleys. It is oftentimes run by someone sitting in the cab with a computer syst em directing its operation.

Our international concern is directed not only at the international commerce upon which we depend -- and approximately 30 to 35 percent of our gross domestic product is derived from or dependent upon international trade and commerce -- we are concerned a bout what happens within each of those countries from the standpoint of the daily lives of their citizens and from the interaction we have with them. We have to worry about what we tell travelers from the United States as they get ready to travel toward the end of next year and into the Year 2000. What can they expect to find in those countries? Will the air traffic control systems in those countries be functional? We need to worry about what advice to give American businesses in terms of threats to t heir continued operations in those countries. We have to worry about, obviously, running embassies and consulates in countries where there may be problems of basic infrastructure.

These international aspects are clearly part of our third tier issues. We don't have the authority to tell anybody what to do. We don't have, in some ways, the responsibility for those systems, but, as I say, we are greatly affected by them. We're conc erned about what happens to people living in those countries and in what is increasingly a global world and a global economy. It is clear that these global chains, whether financial or telecommunications or whatever, are only as strong as the weakest lin k. So, we are all really in it together and it's in our own interest as well as others to focus on this.

So we have evolved a series of strategies. I have been to the U.N. a couple of times and two months ago they passed a resolution calling upon all nations to take action, and to report back to the General Assembly in October. The Economic and Social Comm ittee is now preparing and has, I think, completed background and more detailed information which is being provided to every country. We have been working with the OECD, which has now completed a survey of the 28 members of the OECD in terms of the level of their awareness and activities. I have met with World Bank President Wolfensohn, who has sent a letter personally to the head of state of every country that the bank deals with urging them to pay attention to this problem and support the bank's effor ts. The bank has committed to organizing 20 regional conferences around the world to reach out to people.

I have also met with the head of the International Monetary Fund who has agreed that their country desks shall reach out to each of the countries they deal with and urge them to pay attention to the problem.

I met recently with the head of the Organization of American States (OAS), and with the USIA. We are going to be meeting with each Ambassador to the OAS and talking about a hemispheric conference to deal with this problem in the fall.

After my meeting with Secretary of State Albright, she sent a cable to every American ambassador around the world instructing the embassy and the ambassador to make inquiries of each host country about the level of their activity and preparedness on Y2K i ssues. This will be the precursor to developing, in effect, advisories that the State Department will issue, certainly by this time next year, about the state of preparedness in those countries.

This issue was included on the agenda for the G8 in Birmingham in May and, as a result of that discussion, there was a follow-up meeting in June in London of Foreign Affairs Year 2000 experts from each of the G8 countries. They agreed that instead of hav ing each country's embassies make independent inquiries, they would, in effect, divide the world up and one of the G8 ambassadors in each country would begin to make inquiries and hold discussions on behalf of the entire G8.

But just as the United States doesn't, the G8 doesn't have the authority to tell anybody outside the organization what to do nor do they have the responsibility for their systems. What we are trying to do is reach out and in a cooperative working way fig ure out how we can all jointly try to deal with these problems. This is basically what the U.S. is doing in our domestic working groups as well; engaging industry where we don't have the direct authority, to create a cooperative working relationship to j ointly figure out the obstacles to solving this problem, and the role, if any, of the federal government.

In support of our international efforts, we are using the USIA's ability to do video conferencing in at least 40 countries around the world. We did a video conference a couple of weeks ago with Russian participants in the American Embassy. I was here an d they were there. We had Pravda and a whole series of other press representatives as well as some government representatives. We spent about an hour talking about what we are doing.

The Russian Government has a plan that they are now pursuing which is very good. On the other hand, it started late. The plan was actually designed and developed in May. President Yeltsin talked at some length at the G8 meeting about this, and he talke d personally with President Clinton about it and we are committed to doing whatever we can to provide assistance not only to Russia but to other countries; again, in terms of providing information and expertise to the extent we have it to deal with their problems. We expect, under the auspices of the USIA, to do additional teleconferences with countries around the world. The USIA has recently been directly responsive, for instance, to Bulgaria, which is taking a look at trying to set up a Year 2000 coun cil, and they provided background information and support documents to encourage them to do that.

This is a serious and interesting problem. We have 512 days to go. It is important to bear this in mind because, as I have told the federal agencies and the industries we're dealing with, this is a unique problem not just because of the fact that you ca n't move the time deadline, but it is unique because, as opposed to a lot of other political or business issues, it is not a question of having better documents or a better process or having tried harder. Here, there is a simple performance measure -- wh ether the basic systems and the critical systems work on January 1, 2000.

We are trying to focus all of our activities in the 35 sectors we're working on and on things the national government can do that will encourage people to fix private systems so that all the basic critical systems work. Similarly, our international conce rn is not to simply have a nice process, share a lot of interesting paper, and hold a lot of meetings. It is to try to figure out what we can do to get systems to actually work as we transition into the Year 2000.

So it is a critical issue. There is not enough time left in some ways, but there is still time in which we can do significant things. My biggest concern, domestically as well as internationally, is not about the success of the people who are geared up and are spending both a lot of time and a lot of money on the problem. My biggest concern is the people who continue to think it is not their problem. By definition, those are the people at the greatest risk.

I am happy to have given you this brief background and I would be pleased to respond to any questions or inquiries you might have.

Question: What kind of economic slowdown do you foresee?

Koskinen: There have been a range of predictions about that. I think it is too early to make any solid estimates about what the impact will be. I think it is correct to note, though, that there will not be a 100 percent correction of even all the missi on-critical systems around the world.

Even within the United States, there will be some systems that are not completed in some sectors of the economy and there will be some disruption in normal service. Our goal domestically and internationally is to try to make sure that those disruptions a re minor inconveniences and minor disruptions; not major interruptions with the way people normally live their lives.

At this stage, though, one of the fascinating parts of this problem is that it is impossible to predict what the world is going to look like at the end of next year because it is actually almost impossible to know where everybody is on the problem today.

All we know is which organizations are focused on this problem and working on it. The biggest problems are still being worked on. We are still completing the remediation. Most solutions are still in the testing phase, so if you ask a major bank or a ma jor insurance company or a major industrial company if their work is finished yet, the answer they will give you is no.

Most of them have plans in which they will complete solutions between December and March. That is why I said we will have much harder data in early 1999 about where people actually are internally and externally. Until then, I think it is impossible to m ake an accurate estimate as to what the impact is going to be.

All you can say is that there are great risks that if we don't continue to spend the necessary time and resources on this problem, there is a potential for the impact to be fairly substantial. The difference between my perspective and some more alarmist predictions that there will certainly be major disruptions is that I don't think you can assume the worst yet. I think it is possible there will be major disruptions, but we have got a lot of work to do before we will know that will be the case.

This is why we have placed such importance on contingency plans. We have instructed every federal agency that they have to have two kinds of contingency plans that they are now working on.

The first level responds to possible failure of their own systems. Even if they think they have resolved their problems, until every clock moves forward no one will really know whether a system is actually going to run. So they need to have basic contin gency plans to protect their core business operation. They have to figure out, "What's our basic business? To what extent are we dependent upon information technology to deliver the service or the product? What will we do if some of those systems don't work? How will we work around it? Will we go back to paper processing of checks? Will we go back to automatic provision of funding based on prior years or quarter experiences? What will the 'work around' be?"

The second level of contingency plans addresses the failure of outside systems. In the cases of government interfaces, our agencies have to have contingency plans for the failure of state systems to be able to function in the programs they run directly o n behalf of the national government. What will we do in those cases if a state can't process unemployment insurance claims? If they can't process Medicaid claims? How do we get that program to continue to function while they are solving that problem.

It is at this next level, as I say, where one of the functions of the council is to begin to try to make assessments of where the risks are domestically and internationally; to begin to design appropriate response plans or contingency plans for the federa l government at large in terms of what will be and should be the federal response to a set of system failures in individual federal agencies or domestically or internationally.

At the monthly meeting of the full council next week we will begin the process of making preliminary judgments about what the world looks like and about how we develop alternate scenarios in response to possible failures.

I have told the agencies and industry groups that we have a lot of experience in dealing with localized failures caused by earthquakes, hurricanes, tornadoes. We know what to do when you can't get into an area, where you can't use a telephone, where the power is out. We know how to respond to that kind of situation.

The real question is what happens if you have multiple problems in several areas at the same time. If you have power blackouts in one area, transportation failures in another, problems with the emergency response circuits and operations in yet another. We need to deal with that.

I met with one of our working groups, State and Local Governments, this morning, representing governors, county executives, mayors and others. One of their points was we need to have cooperative contingency planning with them because they are at the firs t line of response in terms of how to deal with multiple failures.

Internationally, on a country-by-country basis, on a regional basis and on an industry-wide basis, we have to be prepared for the possibility of failure. If we are running an embassy or an operation in a country that itself has telecommunications problem s or power problems we need to examine our current contingency plans, and adjust them for what we think the risk is.

Going back to the answer of the first part of this question, my hope is as we move through the end of this year into the first quarter of next year, we will have more and more hard information about where the risks are and are not. Right now, the possibi lities are infinite because of how much needs to be done and the uncertainty about whether they will finish in time.

By the end of the year, with a little luck, I will be able to move through those 35 sectors and say where we are in really good shape. Where we aren't in good shape, we must decide where we think the greatest chances for risks are and design contingency plans accordingly. I am working, in that regard, with the National Security Council and with the Defense Department as well as others, the Emergency Management Agency, to begin to pull together the overall framework in which we will look at the deploymen t of national government resources.

But we have encouraged everyone outside the national government to think the same way. We need to have people looking at and assessing what the risks are, looking at the likelihood that they will get some systems done, but not all of them. They must be prepared to respond appropriately where there are systems failures. Anyone starting today is clearly going to have a race to get their systems up and running by the end of next year.

Q: In your personal opinion, is the whole problem worldwide better understood than, let's say, the circumstances of global warming? And, in your opinion, which is the weakest chain among the OECD countries?

A: It is hard to pick. Obviously, for us domestically, and I think for every country, power is the most critical part of the infrastructure. If you don't have power, you can have all the other systems ready to run and still nothing works. We a re particularly looking at the interface between the United States and Canada because we depend on, and interchange a lot of power and information back and forth. We must make sure that we've done everything we can to ensure that our power grids are up a nd running, that our oil and gas industries function. I think that ought to be a high priority in every country.

At the international level, the most complicated systems are financial transactions and services. The Federal Reserve has been actively working with the Bank of International Settlements in Basil to get central bankers around the world to focus on this p roblem. The Securities and Exchange Commission has been working with international market regulators with the same goal, to figure out how to ensure that commerce can flow as smoothly as it can. It is an area where contingency planning will be important .

It wasn't that long ago that people did a lot of work by paper. It was much more cumbersome and not nearly as efficient, but, you know, we've sort of forgotten about letters of credit and a lot of bills of lading and issues because it is all done electro nically. In some areas, we may need to be prepared for commerce to continue to move without the systems all being up and running.

Telecommunications are a concern. At their request, I met with Intelsat, which runs the major international telecommunications network, and about the only really good news I've gotten internationally is that they, themselves, do not have a problem. Thei r network will run, but everybody accessing that network is at risk in terms of their antenna systems, in terms of the switching and the other networks on the ground. Intelsat is very concerned about that. They are also concerned about the legal constra ints on their ability to provide information.

Although it is not a direct concern internationally, we are pushing very hard for what we call the "Year 2000 Information Disclosure Act." This would provide protection to industries and individuals who voluntarily provide detailed information about how to deal with aspects of the problem. If the information they provide is not 100 percent correct, as long as they were not grossly negligent, or knowingly providing bad information, they would not be subject to increased liability.

That will be of importance to Intelsat, because once people become aware of the problem, their first question is going to be, "Now, what do I do?" And we need to give them more than just the management framework in which to deal with it. As much as we c an, we need to provide them with technical information about how to deal with issues, whether it is a power plant, an air traffic control system, or a financial system, we need to get them access to the experience of other people in those businesses who w ill be able to advise them. These are the areas, we have found, you do not have to worry about. These are the areas you should worry about, and this is our experience with the things that work in those areas.

So that if I had to focus on it, I think the international links that are the most difficult for us right now are probably financial services and telecommunications; although, increasingly, I am getting concerned about transportation because of the impact of it.