Doing Business in the Philippines
A Foreigner’s Perspective
In respect to a foreigner doing business in the Philippines, I have to start by trying to dispel the belief that it is not possible for a foreigner to make money here. Whenever I have written anything about doing business in the Philippines as a foreigner, there is usually a very vocal group of disenfranchised former entrepreneurs who have failed miserably and I guess feel that because they failed all others will do so as well. I would even go as far to say that most of these people have let resentment of their own failure poison their thinking about the possibilities of success and probably are so vocal because another’s success might show them the need to examine their own failure and the responsibility they must personally take for it.
I do speak from experience on this topic as I too failed miserably in my first steps into the Philippines business world. Like many other Expats, I got off the plane with a fair amount of cash in my account expecting to easily turn that cash reserve into a life long steady stream of income to allow me to live like a king until I was dead and buried. It took me 6 months to lose absolutely everything. I ended up here in Dumaguete City with my fiance, 5,000 pesos in our pockets and not sure whether we would have a roof over our heads or food in our stomachs. I could have become one of that vocal group of naysayers, blame the country or its people for my failure and dedicate my life to commenting on blogs and social media pages about the impossibility of doing business in the Philippines successfully, but instead I chose the path that all true entrepreneurs take. I accepted my failures as my responsibility, studied what I did right and wrong as well as what others did to achieve their success, then dusted myself off, checked my ego at the door and jumped in again. After 2 short years, I have achieved success doing business in the Philippines beyond my wildest dreams and everything that I had achieved in my business life prior.
And I am far from alone! Here in Dumaguete I am part of a group of expats doing business in the Philippines that have achieved respectable and sometime phenomenal success. This group numbers over 20 people, but if that is not enough to prove to other entrepreneurs that it is possible to have success doing business in the Philippines, take a few minutes and do some research about some of the biggest and most successful companies in the Philippines. You will find that the majority of them were started by expats. Granted most of those expats were of were of Chinese origin, but hey, they are or were foreigners to the Philippines. ( http://www.philippine-investments.com/can-foreigners-make-money-in-the-philippines/ )
Enough of the prelude and onto the topic of this post. What is my perception of the country as someone who is doing business in the Philippines?
On the good side of Doing Business in the Philippines
I am absolutely overwhelmed by the business opportunities that exist here. The Philippines is a country just entering a tremendous boom cycle. Over the past 5 years the world has started to recognize what the Philippines has to offer and it has become one of the top destinations of choice for both tourists and retirees. As well, the policies set in place years ago to send Filipino workers overseas is starting to pay huge dividends as those early OFWs are now reaching middle age and after decades of hard work and saving, are starting to return to the country with substantial sums of money. These two factors are major contributors to a never before seen influx of capital, which then breeds further economic expansion as the wealth trickles down to everyday Filipinos. I have been fortunate enough to experience a few boom cycles in other locations, and to be blunt, if a person cannot make money in a boom, they should not be in business.
Another real positive about doing business in the Philippines is that despite some of the frustrating bureaucracy to get started and set up, there is very little day to day interference form the government. Back in Canada, one of the main headaches of being in business was the constant almost daily oversight from government agencies such as the Worker’s Compensation Board, Labor Board, Ministry of Transport, etc. The costs of complying with all these agencies was astronomical and by the time I ended my business career there I conservatively estimated that the costs of all this to my busines ranged between 20-30% of our sales. Here in the Philippines, though rules and regulations exist, it has been my experience so far that as long as the proper reporting forms are filled out properly and on time, rarely does any one bother me. I am left to just focus on the running of my business with little interference, and the cost to the business of complying is probably half of what it is, as a percentage of sales, as it was back in Canada.
Though there are other smaller things which I look at as positives, the biggest one is the absence of viable competition. Simply put, most Filipino run business do not have a clue about certain key tenets of business administration. Tops on that list is the idea of customer service, which will come as no surprise to visitors to this country expecting to be treated properly. The other is marketing. Again most Filipino businesses just do not understand that even if they have the best product in the world, if no one knows about it, they cannot buy it. For the businesses I run, I have not had to come up with any new innovative products or ideas. All I have had to do is offer existing ones in a better way than my competition and then let people know that I am. The results have been staggering.
On the Bad side of Doing Business in the Philippines
I mentioned earlier about the frustrations getting started. It can be extremely time consuming and a test of ones patience to obtain all the necessary permits, licenses and approvals to start a business. It seems like there is an endless number of offices to visit, forms to fill out and lines to stand in. When doing our incorporation it took 5 separate trips to The SEC in Cebu City to finally walk away successful. Most of those trips were useless wastes of time, arriving there to find we were missing one document, approval or signature that would have been easily done beforehand if only the bureaucrat in charge had advised us properly.
Once finally legal to do business in the Philippines, the most daunting hurdle and major aggravation I have encountered is in regards to human resources. Management of staff here in the Philippines is like nothing I have experienced before. Motivation of employees in the ways that I have used successfully in business in the West, just do not work here. For the most part the typical Filipino employee simply is not ambitious as us western business people have grown to expect in our past lives. Filipinos generally do not seem motivated by career advancement, additional financial incentives or “pats on the back”. On the other hand, they are severely affected by anything that would resemble criticism and I have found that the day that I resort to saying anything negative about an employee’s performance sets the clock ticking on that employees ultimate departure from the company. In short, neither the carrot nor the stick approach works effectively in human resource management. What I believe at the end of the day is that most Filipinos just want to work a regular job for reasonable pay without any aggravation and very little responsibility. I guess something that it is just needs to be adapted to by us Western business owners that have come to expect something more or different.
Though I may have strayed slightly off my originally intended topic, I have to say that my perception as a foreigner doing business in the Philippines is pretty darn positive. Though there are frustrations which are different than doing business in a western country, those can be overcome with an attitude of patience and acceptance in some cases, and creativity in others. I believe that if a person can put aside some of their established attitudes and expectations based on their past experience in the business world of the west and instead adapt core business management principles with the different cultural reality of the Philippines, there are opportunities that can be capitalized on that dwarf anything we might have thought possible back in our home countries.
As a further aside, I came to the Philippines first as a tourist and had wide open eyes to all the natural and cultural beauty that this country has in abundance. Due to financial need, I had to change to a businessman and as that spend far too little time enjoying and appreciating what made me fall in love with the country in the first place. Now I usually look at the Philippines as an opportunity rather than just a brief interlude in a tropical paradise.