How to Do Business in The Philippines
December 11, 2017
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To expand into international markets can be challenging, especially when trading overseas. Unknown tariffs, regulations, and financial hiccups are the risks small businesses take when looking to find suppliers abroad.
But it doesn’t have to be so scary. The Philippines is known to be a favored destination for US small businesses because of the favorable exchange rate and vast resources.
Though still widely considered a developing nation, the Philippines has experienced lengthy economic growth. It was ranked as the fastest expanding economy in the world, growing by 6.9% in the third quarter of 2017. This development has been ongoing, as the island nation held this rank in 2012 as well.
the Philippines is considered a newly industrialized country, and many US financial analysts foresee its economy jumping from the 34th to the 20th largest in the world.
As a result, the Philippines is considered a newly industrialized country, and many US financial analysts foresee its economy jumping from the 34th to the 20th largest in the world. This means great things for the US, being the nation’s second largest export partner next to Japan.
The growth in the Philippines has been largely attributed to a shift in the region from an economy based in agriculture to one hinging on the manufacturing and service industries after World War II. The war extended the already storied trade relationship between the US and the Philippines, evolving the nation into a preferred export partner for US small businesses.
Introduction to the Philippines
The Philippines is unlike anywhere else in the world. A large archipelago, the Southeast Asian nation consists of over 7,000 islands that are home to over 100 million inhabitants.
This unique geography, along with its placement along the “Ring of Fire,” makes the Philippines a literal hotbed for environmental resources, minerals, and aquatic activity. In fact, over 30% of the nation’s workforce is employed in agriculture, which has been among its top exports since gaining its independence from Spain in 1898.
the US and the Philippines have recently begun to rework the Trade and Investment Framework Agreement to negotiate free, fair, and balanced trade between international suppliers and domestic businesses
A favorable rate of exchange between the US Dollar and Philippine piso, along with a bilateral trade agreement dating back to 1989 (TIFA), spell great things for international trade. In fact, the US and the Philippines have recently begun to rework the Trade and Investment Framework Agreement to negotiate free, fair, and balanced trade between international suppliers and domestic businesses.
With over 7,000 individual islands, there’s a lot of ground (and ocean) to cover when doing business in the Philippines. Some islands hold more than 3 million residents, while some can barely fit a boat. This unique geography provides opportunities and challenges to prospective US small businesses, but the pros seem to outweigh the cons. Access to oceanic shipping routes is advantageous to any investor, while also providing a nice view of the Southern Pacific. However, things may prove challenging if traveling within the country to find a supplier. More on that in the “Traveling to the Philippines” section.
The Philippine capital is Manila, which is often considered the most densely populated city proper in the world. Home to 1.7 million Filipinos, Manila is not the country’s highest populated city. However, it remains the center of the nation’s service industry, and houses the nation’s largest seaport, making it a hub for international trade.
Other highly populated and major cities in the country are Quezon City, the largest and most populous city in the country, and Caloocan, the nation’s third largest city. Both locales are foundations of Philippine life, with Quezon as the governmental center of the Philippines, and Caloocan as the hub of industry. Both cities provide opportunity to international businesses, as they provide distinct avenues into vital sectors of the economy.
The Philippines official currency is the Peso (PHP). Unfortunately, the piso, as it was renamed in 2017, has continually been pegged as Asia’s worst performing currency. This is largely the result of a GDP that attributes 10% of its revenue to remittances and military conflicts in the southern regions. Unfortunately, things seem to be getting worse. The favored rate of exchange of the PHP is the US dollar, with one piso equalling out to 0.020USD.
Long story short, the PHP is not a strong currency. Though it has been noted as one of the world’s most stable in the past, recent conflicts and governmental issues with newly elected president Rodrigo Duterte have weakened its value. This is definitely something to watch out for when exporting from the Philippines, as the PHP-USD exchange rate is still fluid as these situations develop.
A result of its diverse population and many islands, the Philippines is known for its complex languages. Filipino is the most widely spoken language in the region, with 8 major and over 150 minor dialects.
The Philippines has two official languages, Filipino and English, and 19 auxiliary languages. Though Filipino is the most widely spoken, English is quite prevalent across the country, with much of the population speaking it as a second language. Even written Filipino is familiar to English speakers, as it is officially written in the same alphabet. Though legislation is being tabled to change this, it has yet to be put through.
Filipino and English, and 19 auxiliary languages. Though Filipino is the most widely spoken, English is quite prevalent across the country, with much of the population speaking it as a second language
The Philippines is the third largest English speaking population in the world, and this makes the archipelago nation attractive to US businesses and investors, as travel is eased with no need for translation. In fact, the “language of business” in the Philippines is English. Google translate, or Siri might be necessary in rural parts of the country, but urban centers are flooded with English speakers.
Holidays and Traditions
The Philippines is known for its generous number of holidays. The Philippine government offers employees days off that most nations don’t recognize. There are both official non-working days that are observed yearly, as well as observances that, if decreed by the President, may be considered non-working days the following year. We’re going to list both here, marking asterisks for observances that may be non-working. US small businesses only dream of this amount of days off.
|New Year||January 1||Nationwide|
|Chinese New Year||January 28th||Nationwide|
|EDSA People Power Revolution||February 25||Nationwide
|Araw Ng Kagitingan, Bataan Day, The Day of Valor||April 9||Nationwide|
|Black Saturday||April 15||Nationwide|
|Maundy Thursday||Thursday before Good Friday||Nationwide|
|Good Friday||Friday before Easter Sunday||Nationwide|
|Labor Day||May 1||Nationwide|
|Independence Day||June 12||Nationwide|
|Ninoy Aquino Day||August 21||Nationwide|
|National Heroes Day||Last Day of the August||Nationwide|
|All Saints’ Day||November 1||Nationwide|
|Bonifacio Day||November 30||Nationwide|
|Christmas Day||December 25||Nationwide|
|Rizal Day||December 30||Nationwide|
|New Years Eve||December 31||Nationwide|
Communication from the US
To call someone residing in the Philippines, the phone code is +63, which should be added to the beginning of the phone number to successfully make a call. For example, the US phone code is +1.
Due to possible long-distance charges, US small business may choose to email partners to set up an in-person meeting. Though sometimes preferred, this may be fairly unreliable depending on where business is conducted.
On average, less than half of Philippine residents accessed the internet in 2015, and the country experiences the slowest internet speeds of all Asia-Pacific nations. Though this doesn’t necessarily mean much, as two of the countries with the fastest internet speeds are in this region (South Korea and Singapore), it’s something for small businesses to keep in mind when negotiating, or even communicating overseas.
However, texting has recently become a preferred method of business communication in the Philippines. Though generally domestic, don’t be surprised if your Philippine supplier sends you a text message. Also, it isn’t considered rude to take out your phone to answer a business text message. If you aren’t comfortable, you aren’t required to take out your own phone. Just don’t be offended if someone else does.
Finding a Supplier
When looking to invest in the Philippines, or any country far from home, it can be difficult to find an “in” to get yourself started. The Philippine government and other organizations have developed programs to initiate and promote Philippine exports to both bolster the economy and to increase international relations. This way, international investors aren’t lost looking for suppliers. With that, here’s a list of just a few of the organizations working to make international trade with the Philippines easier.
The Philippine government and other organizations have developed programs to initiate and promote Philippine exports to both bolster the economy and to increase international relations.
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Philippine Exporters Confederation Inc.
The largest Philippine exporters organization, “Philexport” is a nonprofit, nonstock organization that boasts over 2,000 members in several sectors and companies in the export industry. They offer development and export promotion programs among other resources to get your small business off and running in the archipelago.
Bureau of Export Trade Promotion
The BETP creates and implements plans and strategies to diversify and expand Philippine exports. The Bureau offers advice on Philippine trade regulations, protocols, and supplier lists to help you begin your search.
Philippine International Trading Corporation
The PITC is the international trading arm of the federal government. It trades with markets normally involved in the private sector, and allows international businesses a safe avenue to enter into a partnership with the Philippines. The PITC has a hand in many sectors and industries, and can even act as an agent for potential buyers.
All of these options, however, must be coupled with a trip to the Philippines. It’s important to establish a personal relationship with your potential supplier, and phone calls or emails just aren’t going to cut it. When you find a company or business you’re interested in, be sure to arrange a meeting and begin to establish a rapport.
Traveling to the Philippines
US citizens can travel to the Philippines for 21 days without a visa and need only their official passport. However, there are safety recommendations to be aware of when visiting. Check out the “Beware” section of this guide for more information.
US citizens may stay in the Philippines without a visa for 21 days and don’t have to pay immigration fees and charges. With a visa waiver, this can be extended another 38 days, and can be extended up to a maximum of 59 days.
After this, visitors may apply for an Alien Certificate of Registration (ACR) if they wish to stay for over 6 months. It will cost you $50 USD.
When traveling to Southeast Asia, US residents may encounter diseases or viruses that rarely occur at home. The three major ones to get are Hepatitis A, tetanus, and typhoid vaccines. Some travelers may want to consider cholera, diphtheria, hepatitis b, rabies, and Japanese encephalitis. Ask your local healthcare provider where and how to get these vaccines, but some local health departments also provide travel vaccines.
Using a Cell Phone
You may need to get a new SIM card when traveling to the Philippines, as many US service providers don’t work there. SIMs are available everywhere in the Philippines, from convenience stores to the airport when you land. These will be preloaded with a specific plan, amount of data, minutes, and texts.
You could buy one in the US to take to the Philippines, but some of those can be as much as $250 USD. To save time and money, finding a reliable SIM at a kiosk in the airport. Globe and SMART kiosks are two of the most popular.
If your data isn’t working for some reason, free public wifi is available nationwide in the Philippines as of 2017.
If your data isn’t working for some reason, free public wifi is available nationwide in the Philippines as of 2017. Most public places have access, as President Duterte rolled out an initiative to provide the service across the country. You don’t have to be in high-volume areas to use it, but if you want to guarantee good service, urban centers like Manila and Quezon City are your best bet. You might need to use data when traveling between cities, or into rural areas.
Manila is almost exclusively the home of major trade shows in the Philippines. Though some minor ones are held in Davao City and Quezon, Manila is the nation’s hub for expos and business fairs. Though the number of English speakers may make you comfortable, the culture is one of a kind, and the differences between the US and the Philippines shouldn’t be taken for granted. Here are a few tips for attending or participating in trade shows in the Philippines.
- Go for the gut. Decisions in Philippine business are made on feelings rather than hard facts. Graphs and numbers won’t go as far as personal relationships. Finding common interests with potential partners is your way in, and developing that partnership will begin and end with these connections.
- Have business cards ready. Business cards are very important to Philippine business people, and there is a specific etiquette surrounding them. Be sure that the card includes your title. You may not receive one in return, but having them ready is vital in establishing that great first impression.
- Save face. Commonly known as hiya, the concept of “shame” in the Philippines greatly affects the way business is done. In public, Philippine business people avoid direct criticism, shaming, and even saying “no.” Avoiding doing these things is crucial, but not forcing your potential business partner to do so may be even more important. Don’t give them a reason to address you negatively. For more on this, check out our guide to hiya in Philippine business culture.
With these tips in mind, trade shows in the Philippines should be a breeze.
|City Infrastructure Philippines||Manila||Fall||Infrastructure, Logistics, Drainage|
|ASEAN Solar + Energy Storage Congress and Expo||Manila||Fall||Green Energy, Storage, Technology|
|WOFEX: World Foods Expo||Manila||Winter||Food and Beverage|
|HVAC/R Philippines||Manila||Winter Every Two Years||Heating and Cooling, Ventilation, Filtration|
|Philconstruct Manila||Manila||Winter||Construction, Building, Materials|
|MIAS: Manila International Auto Show||Manila||Spring||Automotive|
The Philippines represents a unique Asian and European cultural mix that highlights it among other Asia-Pacific nations. It isn’t wise to assume that business protocols are applicable across the region, as doing so may offend, or at least make you seem disingenuous among your Philippine business partners. Don’t be fooled by the English speakers. US and Philippine business practices vary widely, and understanding the process will give you an advantage on your international endeavor.
Scheduling a meeting is important to the Philippine people. It’s common to have a meeting planned for at least three weeks to a month in advance, and should be reconfirmed a few days prior. Being punctual is very important, and your business partners will generally do the same. However, time is considered quite fluid in the Philippines, and meetings may begin and end late, depending on how the negotiation conversation is going.
time is considered quite fluid in the Philippines, and meetings may begin and end late, depending on how the negotiation conversation is going
Getting to Know You
Speaking of which, conversation is key to Philippine business. As with other nations that have Latin influences, small talk reigns in business negotiations. Whether it’s about family, the weather, or sports, talking about something that isn’t business before and after conducting it establishes trust.
Philippine business people put great stock into who you are, and build business relationships based on personal ones. Business meetings should take on a relaxed, friendly tone, and getting straight to the serious stuff can be off-putting to your Philippine counterparts. For more information, check out the “Business Communication” section of this guide.
Keep Your Cool
The focus on creating a relaxed atmosphere is the Philippine concept of pakikisama. In the Philippines, pakikisama refers to the trait of friendliness, and being generally non-confrontational with others. This trait can be found in other Asia-Pacific nations, and is particularly important when conducting business in the region.
It has to do with hiya, or “saving face,” whereby anything shameful being made public is avoided. Don’t lose face yourself, and don’t give your business partners any reason to shame themselves. That means being friendly, non-aggressive, and generally relaxed when meeting.
While you might be used to a handshake, it’s common practice to present your business card before doing so or even formally introducing yourself. The card should contain your place within the company, academic history, and other information that establishes your “rank.” Philippine business partners will mold their communication style around this information, and will place you within their internal hierarchy accordingly.
This hierarchy is important to Philippine business communication, and your rank will determine who you speak to, and how long the negotiation process will take. More information on negotiations can be found in the “Business Negotiation” section of this guide.
Though English is the “language of business” in the Philippines, don’t assume that US communication styles will work internationally. Pakikisama is the name of the communication game in the Philippines. Along with creating a friendly, relaxed atmosphere, this style of communication is indirect, and may seem to be postponing business talk. In reality, Philippine business people also use this method to establish a personal relationship, and to learn about what their potential partner is like.
In doing so, it may also seem that your business partners are prodding, or getting a bit too personal with their inquiries. They may ask about your marital status, children’s names, how they’re doing in school, and other things that you’d expect from a close friend. This can be a shock to the system, as US business communication, while friendly, is seemingly much more “formal.” Other topics of conversation may include US pop culture or social issues, as the Philippine people are well-versed in US culture and media.
Business Etiquette: Do’s and Don’ts
Though the atmosphere may feel relaxed and calm, there are particular things to remember when doing business in the Philippines. To avoid offending, and even to impress your potential business partners, you have to sweat the small stuff. Seemingly insignificant gestures go a long way in Philippine culture, and being aware of them is a sign of respect, and a genuine interest in the culture. Here are some do’s and don’ts for doing business in the Philippines.
- Respect Your Elders: Filial piety, or respect for parents and elders, is commonly practiced in the Philippines. Pay extra attention to them.
- Bring Gifts: Gifts are common expressions of gratitude to the host of a meeting. Make sure they’re wrapped elegantly, and are presented to the highest ranking person present.
- Eat-Up: Light refreshments will generally be provided at a meeting, even if it doesn’t take place in a restaurant. Not partaking in these can be considered rude, so it’s important that you don’t refuse what’s offered.
- Look Sharp, but Unadventurous: Dress conservatively. Dark suits for men, but bright colors are acceptable for women. Looking to the elders is always good. Don’t take your suit jacket off until the highest ranking or oldest person does, for example.
- Be Thankful: Philippine people put a lot of work into their hospitality, and expect you to be impressed by the gesture. It’s common to send a written thank you note following the meeting, or even a fruit basket or flowers as a display of gratitude.
Keeping these tips in mind will put small business owners in good graces with their potential suppliers.
As with the communication style, business negotiations are very different from the US style. To successfully negotiate a deal with a supplier, following specific guidelines and being aware of the process is crucial. As a general rule, indirectness will get you further than you think. Not getting to the point and beating around the bush a bit is a good guideline if you get stuck. But, there are specifics that will get you even further.
Yes Means “Perhaps”
Due largely to the cultural focus on “saving face,” Philippine business people will avoid saying “no” at all costs. This is in line with their non-confrontational attitude, and the relaxed, non-aggressive negotiation style. Therefore, be wary of small wins, or your partners saying “yes” to anything. Often, Philippine partners may agree to a deal or idea even if they dislike it, merely to avoid confrontation.
Don’t be aggressive in your negotiations. Getting straight to the point before small talk is considered rude, and doesn’t allow your partners to get to know you as a person, before getting to know you as a partner. Let the pleasantries play out, and don’t be offput. Making personal connections is vital to negotiations in the Philippines, and contributing to that conversation can bring a negotiation to a close faster than straight business talk can.
Often, business relationships are made through colleagues and friends. This ensures that a potential partner is trusted and reliable. If possible, finding a local “in” to a supplier will push negotiations drastically further than if you meet as strangers. However, be careful not to use these friends as tools to further your operations. Make genuine acquaintances, and allow your relationship to develop into a network that is mutually beneficial.
Take Your Time
Philippine businesses respect and practice a hierarchical structure, and any agreement must be looked over and accepted by the highest-ranking person in the company
Along with the small talk, talking business can take much more time than is expected. Philippine businesses respect and practice a hierarchical structure, and any agreement must be looked over and accepted by the highest-ranking person in the company. This takes time, and deals are generally closed after several meetings. You might not even meet the person making the decision, and if you do, it will take a long time to do so. Because it takes so long, facts could get confused or ideas misinterpreted. Make sure at every stage of negotiation to get agreements in writing to avoid this issue.
Regulations and Permits
Imports and exports are regulated by the federal government. As the US and the Philippines don’t presently have a free trade agreement, tariffs and other export regulations apply to certain goods when arriving in the US. For a complete list of the rules and regulations for US imports, check out the US Customs and Border Protection’s tips (link in the Resources section below) for new importers and exporters.
There are few restrictions on exports in the Philippines. The only things that are forbidden to export are certain types of seeds, plant species, shellfish, and wild species of marine and land animals.
Exports can be looked over by the Customs Bureau, Export Services Bureau, or the Department of Agriculture, and one or the other may require further information depending on the good. To avoid any issues, there are four vital pieces of documentation you and your supplier need:
- Commercial Invoice/Pro Forma Invoice: outlines the type, value, and amount of the good that is being exported.
- Bill of Lading (for Sea Freight) or an Air Waybill (for Air Freight).
- Certificate of Origin (if requested)
- Packing List.
- Customs Export Declarations, which can be found at Provincial offices.
There may also be special certificates required depending on what is being exported and the method of payment. These forms must be attached and submitted to Bureau of Customs Processing Unit.
Since the 1980s, the US and the Philippines have had a Trade and Investment Framework Agreement (TIFA) that has curbed some trade barriers and allowed for less paperwork for exports to the Philippines. That’s why the above list is so short.
To promote international trade, there are no export taxes on goods coming out of the Philippines except for logs and wood, which has a 20% tariff.
When exporting to the Philippines from the US, there aren’t many scams that you need to watch out for. The most common and famed scams in the country are dating and social media scams, and avoiding those should be easy enough. Don’t click on possibly malicious links, and avoid Philippine dating sites.
The things to really be wary of when doing business with the Philippines are big-picture. Corruption is at a high level and severely restricts the efficiency of business operations across the country. International companies become targets for extortion and manipulation by public officials through bribery and a complex legal system. This makes the business environment uncertain. Even exports are subject to corruption as the customs department is rampant with fraudulent import and export documentation. This can make the Philippines a hostile environment to do business with, and international businesses should take note.
These issues are only increasing with the election of President Duterte and his recent corruption scandal. In fact, the US Government has issued a warning to anyone traveling to the Philippines, and advises against traveling to the South where Duterte’s forces are enforcing martial law.
The possibility of reduced remittances could have a huge effect on the Philippines, as 10% of its GDP comes from remittance payments from OFWs (Overseas Filipino Workers). Saudi Arabia is home to many Philippine workers, but is beginning a repatriation program to send many back to their home country. This means less remittance payments, and less money being transferred back into the Philippine economy. The number of remittances has reduced by almost 10% from last year. For more information, check out the “Payments” section of this template.
None of this is to say that the Philippines isn’t an export hub for US small businesses, and it will remain that way into the near future. However, there are dangers to watch out for, as with any other nation.
The Philippines receives more international wire transfers than most nations. In fact, in terms of remittance payments, the Philippines ranks 3rd in the world behind China and India. International payments represent 10% of the country’s GDP and are a staple of the Philippine economy. This is largely the result of the weak Philippine piso (PHP).
The PHP has remained fairly steady in its weakness, but its exchange rate is always subject to change. Especially due to current events involving President Duterte and the repatriation of overseas Filipino workers (OFW), the island nation’s GDP is taking a major hit that could affect how the currency performs in the coming years.
In terms of remittance payments, the Philippines ranks 3rd in the world behind China and India.
However, weak currencies aren’t all bad. International investors looking for a supplier in the Philippines could find that their goods come at a lower price because of the USD-PHP exchange rate. However, reaping the benefits of a weak currency in such a tough political climate is dangerous and, sometimes, financially irresponsible.
The Philippine banking system is known for glitches that cripple domestic payments, and corruption that intercepts international transfers. To avoid these issues, go with a payments system that is secure, fast, and isn’t indebted to any bank.
With Veem, money is sent directly from you to the intended receiver. No bank means no hidden fees, no glitches, no tampering. Other banks can charge up to $45 to send money internationally, and adding to that an unreliable banking system makes Veem even more valuable to your business operation. On top of that, Veem guarantees a favorable rate of exchange on international payments, making your investment in the Philippines even more profitable. Don’t waste your time on banks. Make your payments quick and easy. Make an account and get started.
For required documentation and permits for doing business with the Philippines, check out these links:
Application for Exporters Confederation:
US Exporter Tips from Customs and Border Protection:
Required Import and Export Forms: