With their energies focused on dealing with the region's economic crisis, many companies have been distracted from fixing the so-called "millennium bug", a computer problem that arises because many systems fail to recognise the date for the year 2000.

A space-saving practice in writing computer codes left many older systems with just two digits to recognise years.

That means the year 2000 could be misread as 1900, causing computers to crash or miscalculate data.

The financial services industry, including banking, insurance and investment firms, has taken the lead in fixing the so-called Y2K bug, according to a recent report by Gartner Group Inc.

In Asia, that trend has also proved true. Merrill Lynch, in a June global survey on efforts to deal with the millennium bug, found "a majority of the (Asianbanking) institutions under our coverage expecting to be compliant by the end of this year."

Banks in the Philippines, Korea, Australia, China, New Zealand, Thailand and Malaysia are expected to fix the bug by this year, a Reuters survey found.

Singapore banks are required to convert their systems to Y2K-compliance by the end of 1998, the Merrill Lynch report said.

Hong Kong, Japan, India, Bangladesh, Taiwan and Sri Lanka say they expect bank compliance to be completed by next year.

Few local banks in Pakistan have online systems, so the issue there is more pressing for foreign institutions.

And Indonesia's local banks are struggling just to survive, much less to achieve systems compliance.

Spending money to become compliant hasn't been easy. Banks in Asia are battling deteriorating asset quality, fresh capital needs and huge losses.

In spite of, or perhaps because of, the weakened banking sector, governments are making sure this key industry will be up and running at the turn of the nextcentury.

"If we do not have this issue sorted out, the lines of credit or counter party agreements we have with some overseas banks may be withdrawn," a treasury official at a Malaysian bank said.

Malaysia's six biggest commercial banks have set aside 200 million ringgit ($47.6 million) to fix the problem, a survey by the Association of Banks in Malaysia found.

For some countries like China, the relatively low level of computerisation may help save time and money.

Asia's most populous country has said it will take "timely measures" to tackle the problem, although there have been few details on how the bug will be fixed in a financial system overseeing five trillion yuan ($600 billion) in personal savings.

In key financial centres Hong Kong and Tokyo, just about half of financial institutions have completed their Y2K compliance.

A survey by the Bank of Japan found 48 per cent of Japan's banks and brokerage firms prepared with compliance for their core accounting systems that control deposits andloans.

More than 45 per cent of Hong Kong banks and other financial institutions have completed their bug fixes.

Testing of the systems for most Asian countries will take place next year.

But even that will offer no guarantees, bankers say.

"No one can really know for sure whether they're perfectly prepared for the millennium until it comes," said Tadaaki Otsubo, manager of the Federation of Bankers' Associations of Japan's operations administrations department.

"What's really needed are large-scale tests involving not just individual banks but also intrabank networks. That may be a bit difficult," he said.