To ride Philippine outsourcing wave, a contest of brains and beauty for young jobseekers

Editor’s note: This story is part of a Special Report on the global youth unemployment crisis, “Generation TBD.” It's the result of a GroundTruth reporting fellowship featuring 21 correspondents reporting in 11 countries, part of a year-long effort that brings together media, technology, education and humanitarian partners for an authoritative exploration of the problem and possible solutions.

MANILA, Philippines — In the shadows of rising wealth, beneath the towering bronze statues of presidents, is the pavement where 18-year-old Ricky Nieco sleeps every night.

“I walk around our place and see kids sniffing solvents,” Nieco said from the outskirts of Intramuros Golf Club, a grassy area nestled alongside two major intersections leading towards Manila Bay. Horse-drawn carriages pass by, popular among tourists and introduced to the islands during three centuries of Spanish colonial rule.

“You’d be surprised that all your things are gone. You pity them. Not because they steal from you, but because of the reasons as to why they commit the crime,” Nieco said.

Once dubbed the “sick man of Asia,” the Philippines has won a large share of information technology outsourcing business and become the region’s fastest-growing economy. Although GDP rose by a record 7.2 percent last year, the country also suffers the worst unemployment in the Association of Southeast Asian Nations (ASEAN) at 7 percent. The youth unemployment rate is far higher at 17.6 percent, and most young Filipinos say they can't access education that would prepare them for increasing employment opportunities in the technology world.

Solutions to the problem are emerging but remain rare in a country that has come a long way since the fall of a dictatorship three decades ago. Endemic corruption like the alleged theft of $220 million known as the "mother of all scams" and mismanagement of Typhoon Haiyan relief funds continue to hinder development in infrastructure, education and poverty alleviation. So economic growth has yet to reach millions mired in poverty in the capital of Manila as well as those displaced by armed conflict in the southern region of Mindanao and in coastal communities still recovering from Haiyan.

Nieco lives on the streets of the capital with his father, a cigarette vendor, and his stepmother who provides manicures and pedicures on the curbside. For two years, he has been attending classes conducted on the streets by the local organization ChildHope Philippines.

“I Googled what I needed to learn,” he said of his experience studying in internet cafes after each ChildHope program. Every semester, he took a test at an accredited school and in March passed his final exam to receive a high school diploma. Nieco has been searching for regular employment in the area’s many fast food restaurants since joining ChildHope, with no luck so far.

“I passed my resume around, but I definitely didn’t get a job because they look for people who already have experience or are good-looking,” Nieco said over the noise of traffic. It is a common practice for employers to require details including a person’s age, weight and a photograph to accompany a job application. Many businesses in the service industry also require an applicant to meet a minimum height to be considered.

A part-time job would be ideal, Nieco said. He enrolled in the nearby Access Computer College and must have a steady income to pay for the commute and a yearly tuition of $320. “I want to work part-time at a call center if possible,” said Nieco, “the salary is great and it can help me pay for school.”

College graduates say working early-morning shifts at the call centers of companies like Sitel LLC, based in Nashville, Tennessee, or Accenture, headquartered in Dublin, Ireland, has quickly become their best option.

Along with remittances from Filipino workers abroad, the increase in the number of call center jobs has in recent years contributed to the rise of purchasing power and a growing middle class. The economy’s record growth runs parallel with the boom in Business Process Outsourcing (BPO) in Manila. Earlier this year Manila overtook Mumbai, India as the world’s second-largest destination for outsourcing (Bangalore is first).

Although the BPO industry is projected to add an average of 124,000 jobs annually from 2014 to 2016, companies are still struggling to find qualified workers who are fluent in English and able to comprehend complex technical issues.

“You think Filipinos speak English, they probably do, but can they think in English?” asked Ruth Georget, an official at the International Labor Organization in Manila leading policy geared towards youth employment and recovery efforts from Typhoon Haiyan.

“In the BPO, it’s not a matter of speaking English, but one of comprehension. It’s critical thinking and that’s why they’re saying a lot of people don’t qualify,” Georget added.

Riding the wave

President Benigno Aquino III was elected four years ago amid a groundswell of support after the death of his mother, the former president, Corazon Aquino. His father’s assassination in 1983 helped spark non-violent protests known as the People Power Revolution, which toppled more than 20 years of dictatorship under former President Ferdinand Marcos.

The country is at a crossroad despite record growth and the Aquino administration’s efforts in reform, outlined in his remarks at regional economic forums anticipating market integration under ASEAN.

According to figures from the World Bank, the Philippines in 2009 spent the least in ASEAN on education in proportion to its economy. The budget for public education was 2.7 percent of gross domestic product (GDP) compared with 3.5 percent in Indonesia and 6 percent in Malaysia.

Earlier this year, President Aquino promised to raise spending on education to more than 20 percent in 2014 to address the lack of skilled youth entering the workforce.

In recent years, several companies have emerged within Manila’s nascent startup scene to address the shortage of skilled workers. Amid the skyscrapers of Makati, a bustling business center in metro Manila far removed from the popular images of white-sand beaches, near-pristine coral reefs and ongoing recovery efforts from Typhoon Haiyan, is a two-story building housing an entrepreneurs’ school and the headquarters of Kickstart.

It’s the venture capital arm and startup incubator of Globe, one of the country’s biggest telecommunications companies.

Kickstart provides seed funding for 17 technology companies including Kalibrr, an online skills assessment and job-matching platform tapping into the BPO boom. 

Through a set of questions and timed tests on speech or typing speed, Kalibrr’s online assessment measures skills, knowledge and behaviors. Multinational companies are already using the data to hire potential employees, and Kalibrr is now harnessing it to build a training platform for the government.

“If we could prove to employers that the diploma isn't what you need to do the job, that it's really based on the skills, then this unleashes a massive supply of people who are either unemployed or under-employed because of the existing hiring criteria,” Paul Rivera said from the small, one-room office where he and co-founder Dexter Ligot-Gordon lead a young team of software engineers.

In his blue-and-white-checkered polo shirt and khaki shorts, Rivera walked at a leisurely pace, a mug of black coffee in hand, towards the Kickstart kitchen where recent engineering graduates from the country’s top universities typed code on their laptops. Rivera recalled the near collapse of his first BPO company in the Philippines and how his lessons from Silicon Valley are grounded on celebrating failure and taking risks.

In 2004, the University of California, Berkeley graduate was 22 and setting up the offices of Google’s e-commerce website Mercantila in Bangalore, India.

“What I saw there was the beginning of a wave that transformed the world,” said Rivera, now 31. “It's a wave of technology and globalization converging in a way that allows a Bangalore village person to now compete for jobs with an American.”

“Kalibrr is riding this wave,” he added, with a focus on the untapped potential of millions of young Filipinos. The rising star in the startup incubator’s portfolio recently raised $2 million from international investors including the Omidyar Network of eBay founder Pierre Omidyar.

Access to funding beyond the pockets of Manila’s business elite has largely been due to the recent ease for international investors to bring capital into the country. In its latest Global Competitiveness report, the World Economic Forum ranked the Philippines 65th out of 144 economies, a jump of ten notches in less than five years.

However the macroeconomic success, said ChildHope founder Teresita Silva, “gives a very unequal picture of the situation in the Philippines.”

In a country of 100 million people, roughly 27 million live below the poverty line. The Philippines also has one of the world’s youngest populations. Nearly half of the 3 million unemployed Filipinos are between the ages of 15 and 24 with thousands more being added to the workforce every year.

“The reason we still have so many street children and street families is because people from the rural areas are coming to the cities to seek opportunities for economic survival,” Silva said.

The organization, which has provided educational assistance and shelter to street children like Nieco since 1989, may not survive after this year. One reason for the lack of funding is born from the growing perception that the Philippines is fast transforming into a middle-income country with pervasive wealth.

And last December, ChildHope’s international donors stopped supporting the organization and instead directed funding to those operating in the central region of Visayas and the southern island of Mindanao where poor infrastructure, decades-long armed conflict and natural disasters are keeping millions in poverty.

Making the most at home

Roughly 530 miles south of Manila, in the outskirts of Tacloban City, sisters Divine and Divina Astorga walked along the rubble of buildings destroyed by Typhoon Haiyan’s record wind and storm surge in November 2013. Many of the structures surrounding the Astorga’s home were destroyed by the typhoon.

The sea where their father fishes for a living is a little more than 40 meters from their doorstep. In the afternoon, rhythmic sounds of hammers hitting nails and children playing in the narrow streets bring a sense of normalcy amid the piles of debris and hundreds of temporary tents where their neighbors still live.

In the nearby city, less than half of business establishments have reopened. “This is a big issue,” said Georget during one of her visits to Tacloban, “because in the Philippines, 98 percent of employment is generated by the small- and medium-size enterprises.”

In addition to the lack of opportunities, the costs involved in applying for scarce job openings have been discouraging for the Astorgas. These expenses include transportation, food, computer usage in internet cafes and money for printing documents.

“Your money is gone just to cover transportation costs and you won’t know when and if you can make up for it,” Divine said. The 22-year-old graduated with a degree in marketing in March. Since then, she’s been applying for job openings in Tacloban’s hotels, which is catering to a heavy influx of humanitarian aid workers.

Months prior to the typhoon, her sister, Divina was preparing to join their two older sisters who emigrated from their hometown to work in Australia. But ocean water engulfed the family’s home, taking with it her immigration documents and much of their belongings. “We’re back to zero,” said Divina, 27. “Step by step, we’re recovering.”

In a few months, Divina may join millions of young Filipinos working abroad and sending much of their earnings to their families at home. About 8.4 percent of the country’s gross domestic product is from remittances, which is projected to bring in $24 billion by the end of the year.

In places where there are few options, at times compounded by recurring natural disasters, many of the youth are turning to migration to seek employment in the more developed, urban areas of Manila and Cebu or out of the country.

But for startup entrepreneur Patrick Dulay, going home was a better option than staying abroad.

“When my visa was about to expire, I had to make a decision,” Dulay recalled of his year studying on scholarship in France at Lille University of Science and Technology. “Should I continue in Paris and look for a job that was probably going to be mediocre or go back home where I know I have the resources to make a difference,” said Dulay.

Although his interest in tech could be traced back to an introduction to computer science in high school or while receiving a degree in management information systems in one of the country’s top private universities, “it all started with a tweet in 2009.”

Dulay stumbled upon a Twitter post from a friend based in Washington, DC, which included a link to the online crowdfunding platform Kickstarter, then beginning to gain a large following. “As the years went by, I watched how they evolved,” he recalled.

Three years later, he launched The Spark Project, a platform dedicated to crowdfunding for local businesses and personal ventures. The platform has raised about $36,000 to jumpstart 18 projects including a tourism group in a rural island community and an international scholarship.

“We provide an opportunity for them to raise money with the hope that they can become entrepreneurs and employ other people along the way,” Dulay said.

In the daytime, the startup’s team of six founders are employed in different companies. Dulay is a senior manager at the multinational IT firm Netlogic Solutions. At night and on the weekends, the founders are building Spark.

All are graduates of the elite private university Ateneo, and unlike millions of youth residing in and beyond Manila, they are among the very few with higher chances to land jobs at home and to compete globally.

They say regional and international competition is fierce as the boundaries for doing business are more porous now than they were a decade ago.

“We're not a Filipino company,” Kalibrr co-founder Rivera said. “We're a global tech company that happens to be based in Manila. The majority of us are Filipino, but we see the world as our market and we see the Philippines as a very big lab with a lot of talent that we can leverage.”

The playing field will again change when the ten countries of ASEAN will commit to economic integration in late 2015, creating a single market and production base, which also means more competition from the region for jobs at home.

But for now, the pressure is on to take emerging solutions to scale.

“The more elite look at the Philippines much more positively while those at the bottom of the pyramid, nothing is changing,” Rivera said.

“The problem that we're solving is a global problem.”

This story is presented by The GroundTruth Project.