CASE STUDY:

ADDRESSING MASS UNEMPLOYMENT IN THE PHILIPPINE

COUNTRYSIDE

The project which is the subject of this case study won an international award at
the Asian Mining Congress in Singapore in 2009. It was adjudged as the Best
Community Development Initiative during that year and bested other entries
submitted by major companies all over Asia. The project was considered strategic,
broad-based, relevant and sustainable and was recommended for replication in the
whole mining industry worldwide.

Asia Mining Congress, Singapore

March 25, 2009

The Best
Community
Development
Initiative Award

Author Dr. Mendoza received the award from William Bulmer, member of the Board of
Judges and Associate Director, IFC-USA at the Lawn, Raffles Hotel, Singapore

As the world’s top economies tumbled into recession, we are now seeing severe
downturns. Hardest hit is the labor sector where hundreds of thousands of workers
everywhere have been displaced and dislocated.

As the global financial crisis deepens, Filipino Oversees Workers (OFW) are not
spared in the different parts of the world and are forced to come home to the
Philippines as jobs are lost due to the ongoing crash of the world’s financial
system. As this happens however, in the tiny village of Runruno, in the Northern
part of the Philippines, a community development initiative focused on the Out-of-
School Youth (OSY) is making a difference. This initiative, called the OSY
Skills Development and Placement Program, has to date trained, equipped and caused
the employment of some 640 OSYs who came from all over the province of Nueva
Vizcaya. They came from the different mountain tribes.

This community development initiative is aligned with the corporate social

responsibility program (CSR) of FCF Minerals Corporation, a UK-owned mining company
with mining interests in Runruno, Quezon, Nueva Vizcaya, Philippines. This is also
being pursued consistent with the provisions of the
Philippine Mining Act of 1995 which mandates that companies like FCF has to
contribute in the development of skilled manpower in the host mining community. The
initiative is being implemented by the development arm of
FCF, the Runruno Livelihood Foundation.

The major aim of the initiative is to provide the needed access to training and to
equip the OSYs with the necessary skills that will make them more productive when
they enter the labor market. In terms of strategy, it is designed to match the
skills to be developed in the OSYs with the demands of the industry (in this case,
it is welding skills as Hanjin, the Korean shipbuilding company with plants in the
Philippines, needs thousands of welders).

The youth, which comprise more than 40% of the population in this country, has
always been vulnerable in the current economic and political scenario. Itis often
difficult for the OSYs to find employment owing to their lower qualifications and
relatively short work experience. There is so much poverty in the countryside that
some of these youth turned to hazardous small scale mining activities as the last
option.
Occasioned by the above, FCF Minerals Corporation and the Technical
Education and Skills Development Authority (TESDA -Nueva Vizcaya) forged a
partnership as both respond to the call to address the concerns on unemployment. It
adhered to the principles of the Dual Training System (DTS) as demonstrated by
skills competence of every Filipino who are displaying world class skills in the
labor market.

The initiative was implemented in 2 stages, 1st stage – this covers the planning
coordination, networking and piloting the initiative for a small number of
participants from the barangay and the municipality of Quezon. Direction is to let
the community see that is can be done effectively. This gave rise to the piloting
scheme to be tried first before actual full implementation of the initiative. 2nd
stage – this covers the actual launching and implementation of the initiative after
the success piloting of the project.

To pilot the initiative, it started with four (4) OSYs from Runruno, Quezon
Nueva Vizcaya to undergo skills training in Shielded and Gas Metal Arc Welding at
TESDA Regional Training Center, Tuguegarao City. While on training, mechanisms to
strategize their employment outside the region for better chances of absorption was
explored. Hand in hand, visits were made to Subic Bay Metropolitan Area (SBMA) in
Olongapo City the Department of Labor and Employment (DOLE). An ISO Company,
Polarmarine, and a Swedish Company that manufactures high precision spare parts of
vessels for export quality, was the first target. The four Welding graduates
started an On- the-Job Training (OJT) and completed 750 hours at Polarmarine. Due
to perseverance and positive attitude towards work, they were hired as regular
employees in September 2007. Indeed, it was a good start with 100% employment,
absorption and skills utilization rates.

Sometime in August 2006, piloting the initiative continued and another group of
OSYs again from Runruno, Quezon, Nueva Vizcaya were given slots to undergo the same
course and scholarship by TESDA through the PGMA
Training for Work Scholarship Program at TESDA Regional Training Center.
FCF subsidized their allowances, board and lodging and other incidental expenses
until they will land employment and TESDA's counterpart is training fees of P17,
000 per trainee. Constant coordination with DOLE-SBMA continued until a personal
visit to Hanjin Heavy Industries, one of the largest shipbuilding companies in the
world, was made. Negotiations went on and in
July 2007, the 20 graduates were directly hired by the company. It was for the
first time that TESDA Region 02 training graduates were able to penetrate
Hanjin with the Runruno OSYs as the trailblazers to be employed in the company.
Again, 100% employment, absorption and skills utilization rates were achieved.

With the modest success of piloting the initiative and effective networking with
the absorbing company (Hanjin), the time is ripe for the full implementation of the
initiative. To date, some 640 OSY gainfully employed at the Hanjin facilities at
Subic, Olangapo City, Philippines.

In terms of return in investment and other attendant benefits, provision

Trainings and Placement of the Company to the Out of School Youths (OSYs) on the
prior assessment of an economist guarantees socio-economic viability not
Withstanding the program's IRR that is .33 and 6.40 for stages I and II
respectively.

Economic parameters cited showed that this initiative is economically viable.

Values computed such as Economic Rate of Return and Internal Rate of Return far
exceeded the current opportunity cost of capital (OCC) that is 14% or .14. On the
initial year and generally onwards, Rate of Return is above the investment and
costs. IRR shows that PHP 4.74 may be recovered for every Peso of investment. This
justifies that today and, in the future, the program initiated by
FCF Company for the community has high economic impact.

Further, status of OSYs well-being in the community before and upon the program's
implementation depicts significant economic benefits. Improved lifestyles and
income per attached Tables have been evident.

Overall, this initiative has brought together the resources and the commitment of
both the government and the private sectors to address the concerns on OSYs and
unemployment. Its value can be seen more not on how much was invested, but more on
how effective it has been both from the viewpoint of the benefits derived and
sustainability. Indeed, this is an initiative worth replicating, especially in the
Third World and underdeveloped countries like the Philippines.

CASE STUDY QUESTIONS:

1. Is the issue of structural unemployment as presented in Chapter 3 theories and

concepts applicable in this case study? If so, explain.

Yes, the issue of structural unemployment is applicable to this case study.

Structural unemployment refers to the mismatch between the skills possessed by the
labor force and the skills demanded by employers. In this case study, the Out-of-
School Youth (OSY) faced challenges in finding employment due to their lower
qualifications and relatively short work experience. The initiative addresses this
structural unemployment by providing training and equipping the OSYs with the
specific skills demanded by industries, such as welding skills needed by Hanjin,
the Korean shipbuilding company. The focus on aligning the skills of the workforce
with the demands of the industry is a key strategy to mitigate structural
unemployment.

2. What other major constraints must an out-of-school youth face when seeking
employment in the labor market?

Out-of-school youth face various constraints when seeking employment, including:

Limited Skills: Lack of formal education often results in limited skills, making it
challenging for them to compete in the job market.

Limited Work Experience: OSYs typically have shorter work histories, making it
difficult to demonstrate experience and qualifications to potential employers.

Stigma and Discrimination: There may be societal biases against individuals without
formal education, leading to discrimination in the hiring process.

Lack of Networking Opportunities: OSYs may lack the networks and connections that
are often crucial in the job search process.

Limited Access to Resources: Economic constraints may hinder access to resources

required for job hunting, such as transportation for interviews or appropriate
clothing.

3. Discuss in detail the merits of a private-government partnership initiative that

can help solve mass employment in the countryside.

The private-government partnership initiative outlined in the case study has

several merits:
Resource Pooling: By combining the resources of the private sector (FCF Minerals
Corporation) and the government (Technical Education and Skills Development
Authority - TESDA), the initiative can access a larger pool of financial and
infrastructural resources.

Expertise and Infrastructure: The private sector often brings industry-specific

expertise, while the government provides regulatory support and infrastructure. In
this case, FCF, as a mining company, contributes its knowledge and resources, while
TESDA offers training facilities and programs.

Alignment with Regulatory Mandates: The initiative aligns with the provisions of
the Philippine Mining Act of 1995, which mandates mining companies to contribute to
the development of skilled manpower in host communities. This ensures that the
initiative is consistent with legal requirements.

Dual Training System (DTS): The adherence to the principles of the Dual Training
System (DTS) ensures that skills developed match the demands of the industry,
increasing the employability of the trained workforce.

Success Replication: The case study demonstrates a successful pilot phase,

indicating that the partnership model is effective. Replicating this model in other
regions can contribute to addressing mass unemployment on a broader scale.

4. Write a paper on why the experience in this case study should be considered for
replication elsewhere in the world.

Subject: "Replicating Successful Private-Government Initiatives: Addressing Mass

Unemployment Globally"

In summary:

This paper investigates the possibility of replicating the effective private-public

partnership program that was discussed in the case study about extensive rural
unemployment in the Philippines. By means of well-planned training and placement
programs, this initiative, sponsored by FCF Minerals Corporation and TESDA,
successfully addressed the issues encountered by Out-of-School Youth (OSY). The
following elements support the idea of this experience being replicated globally:

1. Proven Success: The initiative's pilot phase demonstrated a high success rate,
with 100% employment, absorption, and skills utilization rates among the trained
OSYs. This success provides a strong foundation for replication efforts.

2. Alignment with Regulatory Frameworks: The initiative aligns with the Philippine
Mining Act of 1995, showcasing how private-sector initiatives can complement and
adhere to existing regulatory frameworks. Replicating this model in other countries
can foster collaboration between private entities and governments in addressing
unemployment.

3. Economic Viability: Economic parameters, such as Economic Rate of Return and

Internal Rate of Return, indicate that the initiative is economically viable,
surpassing the opportunity cost of capital. This economic feasibility enhances the
attractiveness of the model for replication.

4. Skill Matching Strategy: The focus on aligning the skills of the workforce with
industry demands, as demonstrated by the Dual Training System (DTS), ensures that
the trained individuals are well-suited for the job market. This strategic approach
can be adapted to diverse industries globally.
5. Public-Private Collaboration Model: The successful collaboration between a
private mining corporation and a government skills development authority showcases
a model that can be replicated in various sectors. It exemplifies how public-
private partnerships can effectively address societal challenges.

6. Improvement of Community Well-being: The initiative has not only contributed to

economic development but has also led to improved lifestyles and income among the
OSYs in the community. Replicating this model can bring similar positive impacts to
other communities globally.

Finally, the case study experience provides a good template for resolving
widespread unemployment through private-government collaborations. Its performance,
economic feasibility, and strategic approach make it a tempting model for
replication, particularly in places confronted with comparable issues in young
unemployment and skill development.

Group Activity:
This class activity what was highlighted in this as the biggest socio-economic
problem that contributes to poverty which is corruption.

1. Look at the news stories and gather newspaper clippings of reports bearing on
corruption in our government.

2. Gather at least five (5) statements from President Duterte which centered on
how much he hated corruption.

3. With these materials, prepare a 5-minute presentation that centers on your

recommendation of how to get rid or minimize corruption in the government.

4. Ask for a critique from the class after your presentation and incorporate
possible recommendations that will be made.