Chapter 3 - Trading Conditions

Foreign Trade | The Opportunities
Packaging and Labeling | Negotiating a Deal | Distributon Selling and Pricing

Although the Philippines is slowly opening its domestic economy to international competition, progress has been slow and entrenched domestic interests are able to thwart government efforts in many instances.

Foreign companies that have been most successful in the Philippines are those that seek to work with and alongside domestic companies rather than seeking to compete directly with them. If your business can be seen as an opportunity rather than a threat then you will have a much better chance of success.

Joint venture arrangements need to be approached with care. While Filipinos may on the surface appear more "westernized" than is the case elsewhere in Asia, this is really only a veneer. In approaching contractual matters, the Filipinos are no different to the Chinese, Japanese and Koreans (and others) who regard the signing of a contract as merely the start of a relationship rather than its culmination.

There are no short cuts to successful business whether you are seeking a trading deal or looking to set up a manufacturing center to tap the local market. Tap any foreigner who has been in the Philippines a while and you will be told that there are more examples of unsuccessful business ventures than there are successful ones.

As is the case in China and Japan, good business is done on the basis of relationships established over a period of time. Filipinos are genuinely hospitable but do not make the mistake of confusing hospitality for friendship. In most instances meetings and entertainment will be used as a means to size you up and determine whether the local side wants to deal with you or your company.

Face is also important to the Filipinos and possibly more so than is the case in North Asia. Some egos can be easily bruised and offence caused can sometimes bring a violent response. Remember that many Filipinos carry guns and that guns and alcohol do not mix.

At an initial meeting it is unwise to get down to business straight away. Normally small talk will dominate until a point comes when the Filipino side will ask a leading question that provides the cue for some serious discussion. Many good deals founder when westerners appear too hasty of not sufficiently respectful of the person they are dealing with. It is the relationship that is of paramount importance and not the time spent in a meeting. It is not unusual for the business side of a meeting to appear to be tagged onto a social occasion. This is so "face" is not damaged should the business side of the discussion not go so well. This can all be incredibly frustrating at first but once accepted can greatly increase the chances of success.

Filipinos love to eat and fortunately dining out well in Manila can be a much less expensive proposition than in other Asian centers. Where you choose to eat and the food ordered is as important as the business details. The number one rule is to pay respect to your host and make him or her feel comfortable. Compliments are a normal part of the introductory dialog and talk of family and children should be encouraged.

If you are meeting during the daytime then you can always suggest "merienda" - otherwise known as "afternoon tea" - which is a hallowed tradition in the Philippines. Many of the finest hotels offer merienda buffets at quite reasonable prices and can be an ideal way to break the ice and show respect for your counterpart without being compromised in any way.

Beware of any "yes" answer conveyed in a "non-yes" tone of voice or given after an uncomfortable pause. Filipinos do not as a rule like to give a negative answer so that you will not lose face.

Unfortunately there is still a propensity among some foreign companies to see Asia as a rich and easy picking. The sheer size of the consumer market in this part of the world dazzles many board members in Europe and North America and many a hapless VP for Sales has been sent into the region to make a deal and has been given short shrift when he or she returns empty handed.

Simply put, it takes time and patience and above all a presence in the country if you are to succeed long term. But in terms of creating a positive response from initial sales calls there are a few basic steps to follow:

At initial meetings come well prepared for detailed questioning and, if necessary, have technical support on hand or at least a cell phone call away. Ring your people before the meeting to make sure they are standing by. If caught in the traffic, do call and advise of your late arrival. It is better to allow for this eventuality and leave for your appointment in plenty of time.

Have good quality brochures and other support material on hand and in English. If not professionally printed then at least have good quality desktop printed copies handy - preferably in color. If you must resort to photocopying make sure it is of good quality - this will often mean doing it yourself rather than trusting it to someone else. Unfortunately while you are expected to put in an exemplary performance, the person entrusted with your photocopying may not be so concerned.

If possible have product samples on hand or a video presentation available. The usual format in the Philippines is NTSC/VHS format. These days the multimedia presentation options are extensive and many companies offer copies of their sales pitch on CD-ROM business cards.

The language of business in the Philippines is English but that will not stop your counterparts from dropping into the vernacular whenever they feel inclined. In any complex negotiation involving a team approach, try to ensure that you have at least one Filipino speaker on your team. Unfortunately there are many Filipino dialects and while Tagalog is universally understood, you may find your opposite number lapsing into the Visayan or some other language. If you have had the opportunity to dine with him or her before the business meeting you should have picked this up by asking about the home province, and prepared accordingly.

Be wary of any deal in which you provide the technology or other intellectual property or assets and the other side supposedly puts in the cash. Such arrangements rarely work and almost universally it is the foreign partner that loses out.

Above all else remember that your business will need to be nurtured and relationships will need to be managed. That probably means having a person on the ground. If you intend appointing a local agent - do so with care - there is no guarantee they will have your best interests in mind. If your business is really worth it then it would be better to have an expatriate staff member on the ground here - at least during the start up phase.

Usually the foreign chambers of commerce operating in the Philippines will be in a good position to provide advice and access to their members who will undoubtedly have "been through the hoops." Your bank will be another source of information and advice.

There are also companies and expatriates in Manila who specialize in assisting foreigners into business in the Philippines and in setting up companies and obtaining the necessary visas and other permits. You may pay a little for their service but usually it is money well spent.


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