Current business situation
Growth in the Philippines is largely driven by:
- Domestic consumption currently accounts for 70 per cent of GDP (Source: CEIC, ANZ Research, 2015), creating a new class of Filipino consumers who are rated as the second most confident consumers in the world, according to the AC Nielson Global Consumer survey.
- Extensive infrastructure commitment: The new administration has committed to dedicate 5.4 per cent of GDP towards public investments (A$23.36 billion) and allow 24/7 construction work by 2017.
- Remittances from Overseas Filipino Workers (OFWs) account for 8.8 per cent of the Philippines’ GDP. In 2015, over 13 million OFWs sent over A$33.5 billion to family and friends.
- Business Processing Outsourcing (BPO): Having grown by 19 per cent year-on-year, BPO was the fastest growing sector in the Philippines in 2015. It employs over 1.2 million people and contributes to six - seven per cent of GDP (Source: IT and Business Process Association of the Philippines (IBPAP), 2016).
- It is expected to contribute over A$30.8 billion to the economy in 2016 (Source: Eagle Watch, Alvin Ang, February 2016) and is projected to eclipse the OFW remittances and contribute around A$73.6 billion to the Philippine economy (Source: Usource).
Having recently marked its 70th year of bilateral relations, Australia and the Philippines enjoy close relations, as reflected by the following:
- Two-way trade between Australian and the Philippines is valued at approximately A$4.2 billion. It has grown 50 per cent since 2010.
- Australia maintains its position as a key destination for the growing number of Filipino students looking to study abroad and continues to experience growth with 10,931 student enrolments in 2015.
- Over 280 Australian companies have established a presence in the Philippines. While some of these companies are pursing specific opportunities locally, others use the Philippines as a service delivery centre for the Australian or third markets.
Business is normally conducted in English. During initial meetings it is recommended to address the Filipino person by using their surname and title (for example, ‘Secretary Cruz’ or ‘Director Mendoza’) as a sign of respect. After the first meeting, titles can generally be disregarded in conversation, but it is preferable to use them in correspondence. Filipinos normally use two forms of address/names. Their ‘full name’ is used for official business transactions, such as signing of contracts while their ‘nickname’ is the one that is usually seen on their business card and the name that they prefer other people to address them during a conversation.
Personal relationships are very important in the Philippine business culture, with personal interaction and face-to-face meetings considered necessary to establish and maintain a solid business relationship. Filipinos will normally engage in light conversation and even ask personal questions as this is how they establish a relationship. Humour plays an important role in relationship building but avoid topics on politics and religion.
Filipinos are very sensitive about losing ‘face’ and place a premium on their reputation. Avoid direct confrontation, criticism or actions which will cause offence or public embarrassment for the Filipino business person as this may prove counterproductive. Always be polite and courteous when talking with Filipino business contacts. Related to the concept of ‘face’ is the hesitation of the Filipino to say “no”. In order to save face and to avoid disagreement, Filipinos will rarely say “no”. Foreigners should closely observe the subtle nuances in the body language to discern the non-verbal message being relayed by the business person.
Filipinos have a relaxed concept of time (Filipino time) and may not always be punctual for business meetings. Business appointments should be made a few weeks before arrival and it is recommended that a call to reconfirm be made a day before as confirmed appointments can be cancelled or postponed at the last minute.
Setting up in market
In many cases, a foreign entity cannot own more than 60 per cent of the enterprise, with the majority owned by local entities. Depending on the industry, a local partner may be necessary to facilitate doing business in the Philippines. However, exceptions for majority foreign ownership exist for certain types of industries. It is best to get to know the market and the key players prior to deciding on a partner. Austrade’s team in Manila can assist in providing market intelligence and insights, and introducing relevant contacts in the market.
It is strongly suggested that Australian companies seek professional legal and accounting advice prior to establishing a business in the Philippines. Austrade Manila can refer professional service companies that specialise in these areas.
Banking and finance
Despite external challenges of the world market, the Philippines currently enjoys a strong domestic economy, increased public spending, stable inflation, low interest rates, and a solid external position which boost market confidence in the financial sector.
The Bangko Sentral ng Pilipinas or BSP (formerly the Central Bank of the Philippines) is taking continuing initiatives to improve its prudential regulation and supervision of the operations and activities of banks and non-bank financial intermediaries, which can be expected to further strengthen the Philippine banking system and achieve economic stability for the country.
A wide range of banking services is available. The market for specialised banking services is relatively new, but it is maturing.
Foreign banks play an important role in the banking system, particularly in facilitating inbound foreign capital. A number of major international banks have branch operations in the Philippines offering full banking services.
The Philippine Stock Exchange lists a variety of equity securities. There are generally no constraints on transactions by foreigners.
Foreign investors currently may acquire up to 60 per cent equity in a Philippine bank.
(Source: Doing Business in the Philippines – PWC)
Links and resources
Government, business and trade
Australia-Philippines Business Council
Australia and New Zealand Chamber of Commerce of the Philippines
Bureau of Investments in the Philippines
Department of Trade and Industry
Philippines-Australia Business Council
Philippine Economic Zone Authority
Philippine Government Portal
Philippine Securities and Exchange Commission
News and media
Philippine Daily Inquirer
Manila Bulletin Online
Please note: This list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only. The content is for information and carries no warranty; as such, the addressee must exercise their own discretion in its use. Australia’s anti-bribery laws apply overseas and Austrade will not provide business related services to any party who breaches the law and will report credible evidence of any breach. For further information, please see foreign bribery information and awareness pack.