Getting Paid Doing Business

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This is an interesting exchange between guest on our mailing list regarding how to get paid doing business in the Philippines.

Dan wrote:

Point to ponder; Can you get blood out of a turnip? My girlfriend is a pianist who taken over operating her family's music studio. Mostly teaching piano, but sometimes vocal and other instruments. When I talked last with her about her business she said she had over 50,000 Pesos in receivables.

She sends messages requests, she refuses service after awhile, but 50K is 50K. How is she going to get paid if the economy has left many with out work. In her case many of these people are relatively well off. They are politicians and business people. But they don't pay.

She was also asked by a school to put on a piano concert for which she was going to be paid (I'm going by memory here) 15000P.Then a week before the concert, after she had chosen and practiced the pieces she was going to play, they came back and said they'd pay her 7000P.Then they dropped it to 5,000 pesos. At this point she dropped out of the concert. It just wasn't worth the time and effort. Plus there is a certain principal to stand on. This is the way they do business in the Philippines.

This is the way a school treats one it's former students whom they've asked to come and perform. Add to that you will be a foreigner who will be at the mercy of the local courts, and you will probably find the going very difficult. Another example. I had been sent to the Philippines to manage a ticketing operation for the CCP (the government run arts center in Manila).

Contracts had been signed and agreements had been reached. But midway through the process, new President, Estrada decided to place the wife of his Vice President on the board of directors. The new board wanted to use a different ticketing company. It was considerable more involved than just this, but this is the point. After talking with numerous people I was told over and over again; don't even bother going to court. You haven't a chance.

They will just stall and stall and stall until you run out of money or patience. As I said there were numerous other factors, but the company I worked for finally said, ship the equipment back and come home. They lost (according to them) $100,000 in the deal. Do you really want to go into business in this kind of environment?

Dan Hello Again:

When we were in the USA, our Philippine tenants were often way behind in their rent. After we got here, they got caught up quick and now are on time. Our agents were afraid to offend the tenants. We use a hard line approach, pay up. You get the shelter, pay for it.

We have share croppers on over 20 hectares of land. Many have not paid since 1993, when my father-in-law as still alive, (RIP). Now they are asked to leave or pay. We have worked out a system where they pay or will be expected to move along down the line. All realized that we were right. We had a lawyer from the Bureau of Land (Agrarian) Reform mediate the session. He found in our favor. The tenants will now pay every quarter or will pack up and be replaced. They do not like it, but that is how things are. Who is giving any of you folks free rent? I'll bet no one. Same here, our taxes on one part, one hectare, is about 400 pesos a year. It is not the money, it is the principle. Four hundred pesos is easy enough to make of them work and pay it quarterly, about 100 pesos a quarter. They expected us to pay the taxes and still get 300 square meters for a house lot to work and live on. Now they will loose that if they do not produce. Some are old, but the next generation is young and strong, but lazy as the day is long. They now will produce or move along.

Each tenant farmer in the Philippines is entitled to one temporary home of Nipa. On our property, they all built concrete block homes. Each farmer is entitled to one home. In our case, several have as many as four concrete block homes. All have at least two concrete bloke homes, one for the old folks and one for the younger generation. Now they are in danger of loosing those homes for nonpayment. I know it sounds tough, but they all know the rules. They all are expected to generate a profit. I have heard excuses, but now, because of the lawyer, they know we mean business and the fact than I am a Kano, did not enter into the picture. Mama took care of the whole thing. We were given a paper by each sibling of my wife's in the USA. Each signed that my wife could and would speak for them and manage their property. That is what is now happening. They do not like their feet to the fire, but that is how it is.

To do business in the Philippines, one has to be persistent and kind, but have the heart of a gun fighter and the skin of a carabao. One can not listen to any excuses or you will pay taxes on land and they will sleep in a house you provide, free of charge.

Better to have collected from 1993 on, but we were not here and the tenants thought they could claim the land as my relatives were not here. Good lawyers in the family and patience on our part, paid off. [JJ]

Utang, Credit: Doing business in the Philippines

P.S. Dan and all:

I have also found that folks expect me to pay now.They 'know I have the money' (???), and expect instant payment. They do not understand that I often need to wait for my check to be deposited in the USA. But, when they get something from me, they think it is a gift or they will make Utang (SP). They borrow and do not pay. I have found that after 500 pesos, no more utang. Some are poor and will not be able to pay.Some are rich and will not pay. I have learned to deal with those that pay.

J Claire on doing business in the Philippines: Utang, Credit

What about Business Opportunities?

There are fantastic investment opportunities, if you have even a small amount of capital. And in this capital starved country, such opportunities can be quite profitable. ROI is very high in many businesses. But you need former business experience and good counsel. Succeeding in business is not easy even in your own country.

Here are some of what Philippines Government says about Doing Business in the Philippines:

Quality Manpower and Resources

The Filipino workforce is one of the most compelling advantages the Philippines has over any other Asian country. With higher education priority, the literacy rate in the country is 94.6% - among the highest. English is taught in all schools, making the Philippines the world's largest English-speaking country. Every year, there are some 350,000 graduates enriching the professional pool.

Strategic Business Location

The Philippines is located right in the heart of Asia - today the fastest growing region. It is located within four hours flying time from major capitals of the region. Sited at the crossroads of the eastern and western business, it is a critical entry point to over 500 million people in the ASEAN market and a gateway of international shipping and air lanes suited for European and American businesses.

Liberalized and Business-Friendly Economy

An open economy allows 100% foreign ownership in almost all sectors and supports a Build-Operate-Transfer (BOT) investment scheme that other Asian countries emulate. Government corporations are being privatized and the banking, insurance, shipping telecommunications and power industries have been deregulated. Incentive packages include the corporate income tax, reduced to a current 32%, with companies in the Special Economic Zones are subject to only 5% overall tax rates. Multinationals looking for regional headquarters are entitled to incentives such as tax exemptions and tax and duty-free importation of specific equipment and materials.

Developing Infrastructure for Global Growth

A well-developed communication, transportation, business and economic infrastructure links the three major islands and distinguishes the Philippine economy. Highly accessible by air, water and cyberspace, liberalization of inter-island shipping and domestic aviation further sparked improved facilities and services. The container terminals are suited to handle cargo traffic at the highest levels of efficiency.

Communication provides redundant international connectivity 24/7 with fiber optic cable as primary backbone network and satellite as backup. Economic reforms emphasize regional growth, converting remote areas into business centers. The landmark BOT legislation allows private investors to build and operate infrastructure, then turn it over to the Philippine government after a set period of time.

Hospitable Lifestyle

Discover the best of sun, sea, sand and style in the tropical setting teeming with the best of western amenities. The Philippines is second home to expatriates who enjoy the company of the warmest people in the region, the country's openness to varied cultures and a decidedly global outlook. Expats enjoy accessible and affordable luxuries - business centers, housing, schools, hospitals, shopping malls, hotels and restaurants, beach resorts, and recreation centers.

Unlimited Business Opportunities 

As Asian economies integrate within the vast framework of the ASEAN Free Trade Agreement (AFTA), the Philippines is the natural and most strategic location for firms that want access to the large ASEAN market and its vast trade opportunities. The Philippines has enhanced and primed up various areas for investors and offers a dynamic consumer market accustomed to an array of product choices created by a competitive domestic economy.

Using a Go "Between in Business" in the Philippines.

It has been almost 500 years since the first Europeans arrived by sea in Asia. A couple of hundred years before that Marco Polo traveled to China to do business following the ancient silk road. All of those who have been successful in business have used go betweens.

The tradition of using a knowledgeable local, a comprador, is the only way to go. Most of us are ignorant of the language's), the customs, and who knows what else. We do not even begin to know the depth of our ignorance. Some of us are fortunate enough to have married an intelligent woman who plays the role of go between.

I suggest that you confer before and after any transaction with your Filipino person in the middle. Learn as much as you can but let them handle the details of the transaction. You can, of course, set limits, etc. But do not kid yourself, you will never be really competent, for all kinds of reasons, to handle the details or to negotiate directly the best deal.

Courtesy Bob LaQ

Make sure you go between is someone you can trust. Even you wife can double dip collect from both sides. I have seen it happen often especially when a foreigner does not give his wife enough money to support a family who needs supporting.