Doing business in the Philippines as a foreigner

headache

I often get asked about business advice on trying to do business in the Philippines and with the network of people that I have built up with over time in the Philippines you often come across people who have been through the hoops on most ventures already.

There are common problems that come up time and time again and a lot of it is down to a complete clash of mentalities between East meeting West and often for Westerners its simply just not worth the hassle which is why more often than not businesses not only fail they simply just give up and get chalked as experience.

The first thing that is obvious is that anybody will apply for a job regardless of what you state in an advert same as when you ask for skilled labour there never seems to be a shortage of those skills. Until you employ someone then find they are generally completely useless and lied to you just to get some work. The “Yes” mentality is a big problem as people will say yes regardless if they haven’t got a clue or simply should say no. I have heard people say about this being down to local population not wanting to offend or trying to please their employer, personally it makes no sense whatsoever as the damage they do to things is normally a lot worse than anything that would involve training someone to do something.

Another problem is down to respect of possessions as I don’t think it matters if your Filipino or not but simply its not theirs is enough for it to be used and abused in a way that in the West may end up in a punching match. A prime example of this is when some village idiots dropped 2 welding machines off a roof to save them having to carry them down. Put me P14,000 out of pocket and to the stage where tools are off limits because common sense seems to be. I remember hearing someone mention a couple of years back why a rich Filipino had his garden done by shears and not a lawnmower there is your answer the gardener is likely to destroy a lawnmower.

Company loyalty is something that is often missing as well I know of someone who employed 10 Filipino’s for a year and trained them in their work as they were all supposed to be competent when they joined him but none of them actually had experience or ability to lead themselves which left him having to go over everything they did as well as train them constantly. Once experienced they left for other jobs as they believed they were now worth more, this left him out of pocket as he wasn’t expecting to be a training service and the investment of time was based on getting people up to scratch before moving on to a more productive venture the time wasted on training people literally wiped out his cash flow leaving him after that to work alone also realising he was better off without the staff as things were more productive working on his own.

Theft is normal and part of the culture. Prime example of this is in contracting for construction. You get a builder to quote the job and he comes in cheaper he then gets the builders merchant to supply the goods with an extra 25% on the receipts pocketing the difference. Very common practice and you get your receipts thinking this builder is honest but he’s skimming straight from your pocket on every single thing you buy. How most people treat staff is to check peoples pockets on arrival and when they leave to make sure nothing is being stolen. I know of restaurants where the entire staff were in on defrauding the business. A prime example of a restaurant scam is chef’s will bring in their own food and sell it as if its your meals tight auditing is always needed on a catering business regardless of where it is but be aware you won’t know who you can trust or not and its much better to treat everyone as if there is a chance of them stealing to reduce your risk. There is no benefit from being nice.

The Philippines does offer a good way to work on things offshore such as web development and with that I would personally advise just getting people as and when you need them. The reason behind that is simple the employment laws here are a nightmare and you won’t get staff as commited to your business as yourself. Better to do a fixed price on each part of a business as and when required and just build a portfolio of people that are reliable, don’t overload any one person as this may stop things being finished on time and be aware often if you pay people too much they may not want any work for months as they will sit on the cash they got paid on the last job. Which goes back to my builders before who disappeared for 2 weeks after they had received enough pay for the last month that they could sit drinking and gambling until their money ran out which left me doing a lot of the work myself. There is no commitment from their end!

All in all if you can afford to just retire do it. If you can find work you can do yourself that churns a profit do that. Personally setting up business here would be the last thing I would advise any foreigner who isn’t looking to spend time wading through the crap and also hasn’t been in business before.

9 comments for “Doing business in the Philippines as a foreigner

  1. January 28, 2011 at 5:46 am

    Wow!, this was a top quality post.

  2. February 13, 2011 at 9:28 am

    wow, this post here is very real in the philippines, yeah im a filipina, im not agreed about the situation in the philippines, specially when it come to a business whether small or big business,you always got a head ache,and the other things is, when you make a deal with those people about time, i mean, when you set a time and they does’nt come in exact time they always late even one hour or 30 minutes, sometimes is more than that, they saytime is gold, but here in the philippines time is nothing, and if you ask question or you want to know the information they don’t give you a exact information that you can rely on, nothing straight forward here in the philippines,”only in the philippines” before that word is just a joke,but now it’s in reality situation,

  3. R.K.
    February 16, 2011 at 11:57 am

    I think you hit it on the head several times in your post here. I retired here in the PI in 2006 at the tender age of 42. My wife and I bought an internet cafe and decided to make a go of it. We had many similar experiences and learned a lot over the next two years. The business almost went bankrupt but we had to keep fighting for it because it was our primary source for income. For the first 2 years, we depended heavily on others to run the place. Then we decided to fire everyone and take it over ourselves. We did all the day to day tasks for a few months and really learned the business. (we had no prior business experience) When we got it running smoothly, we looked into hiring some help again. And you are very correct when you say its hard to find dedicated employees. We went through about 20 applications and hired our first employees. We watched closely and held on to the people we liked. We paid them well and treated them with respect. There were also many who did not pass our muster and many who were outright dishonest. But the ones that we DID keep, they dont want to work anywhere else. They really enjoy their job. I guess my point is that there really is difference in cultures, but it can be overcome.

    Now our business has grown to 3 locations. I have 2 managers and a full time protige technician among our 14 full time employees. We hold the standards high for honesty and integrity.

    I agree that finding competent help is not easy, but it most certainly is possible.

    I hope that this comment will be useful to someone looking to the PI as a place to build their new home. 🙂

  4. February 21, 2011 at 4:53 am

    This post tells real incidence in the workplace here in the Philippines. However, this can’t be true in all Filipino workers. There are still honest, responsible and hardworking workers that the Philippines has to offer. If do business in the Philippines or anywhere in the world, we should not forget good management and leadership. As a good manager or leader, we should also value relationship. I hear that foreign employers, prefer to hire Filipino workers abroad instead of other nationalities because they think that they are talented and dedicated. The only difference is that working abroad provides more competent compensation than here in the Philippines. Lastly, it is still the responsibility of the employers to have a quality management from planning, organizing, hiring, directing to controlling.

    • Profile photo of OLDARTICLES
      February 21, 2011 at 8:36 am

      But often the management is too “hands on” in the Philippines compared to many countries, abroad Filipino’s know they have to pickup the pace to match that of their colleagues which is why when abroad they gain respect. At home corruption not only from officials but staff thinking its “OK” to steal because the business owner is rich in their eyes as well as many other reasons including low profit levels hamper good business.

  5. Vaun
    April 25, 2011 at 3:37 pm

    I’m in the food business and your example of smuggling their own food and selling that instead of mine went on under my nose for 3 years and resulted in a 10 million pesos loss of revenue. When I uncovered the scam, my sales doubled the very next day after I fired the offending staff. This happened in our food kiosk in SM Mall Pampanga. Then more recently a different version of the same scam was discovered.

  6. Tropicalpenpals
    April 25, 2011 at 3:54 pm

    Very common.. thing is when I tell people to treat everyone as if they are a thief they look at me as if I am mad yet I know so many horror stories of people that look at those lovely smiles every day from the same people that bankrupt them. No point being nice its business and FILIPINOS don’t trust FILIPINOS so why should we?

  7. September 27, 2011 at 2:12 am

    Great post, Matt. I am doing business in the Philippines since many years without having any problems – because, I trust my two brothers-in-law. Might be also “one in a million” as a saying goes. I also heard a lot of different “horror-stories” from other expatriates… .

  8. Profile photo of OLDARTICLES
    September 27, 2011 at 2:31 am

    Hi Klaus a lot depends on what your doing but also who’s doing it. If you get the right people it all falls into place but often even then after a while people can do some really odd things.

    An example of this was a friend of mine who had 2 employees that had worked with him for years run off with P5million each. A lot of it is down to people thinking its ok to steal from you.

    But if you haven’t had any hassles your probably one of the minority but also what is it your inlaws do for you?