Philippines Market Entry

Philippines Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

Finding an appropriate distribution and sales channel is a prerequisite for successful product placement in the Philippine market. In the conditions of this market, it seems necessary to realize sales or participate in tenders with the help of Filipino partners – importers or exclusive distributors with a suitable form of their interest and with a suitable form of participation of the supplier. Due to administrative obstructions and complicated legal relationships, it is not only appropriate, but often required by law to apply the form of a joint venture, but only after good and long-term cooperation with the distributor/representative and occupying a certain part of the market. The advantage of using a distributor or representative is his knowledge of the market and, above all, the mentality of the local customer. The use of “specialists” with knowledge of customs clearance issues or other acts when negotiating with local authorities speeds up and makes this process cheaper. The appropriate choice of the amount of the commission, the scope of the assortment and the definition of the territory of operation are decisive criteria for further cooperation with the local representative. They usually demand the exclusivity of the manufacturer’s representation from the beginning, so that they can cover the high costs they have to spend to launch the product on the market. It is advisable to grant exclusivity only after gaining some experience with the selected representative and it is advisable to tie it to a minimum annual turnover. From a territorial point of view, most imports are made through the port or airport of Manila and possibly through the CLARK airport north of Manila. In 2014, truck traffic through Makati City (a de facto part of Manila) was restricted, which greatly complicates the transportation of goods between manufacturers and the port. Manufacturers are thus forced to either pay for passage through Manila or use the Batangas port, which is connected to Manila by the SLEX and Star highways. Of course, the transfer to Batangas increases the cost compared to Manila. Another important international port is the port of Cebu. The port in Davao City on the island of Mindanao serves trade with the southern neighbors of the Philippines, especially with Indonesia, Malaysia and the Sultanate of Brunei-Darusalam. The Customs Tariff and BOC (Bureau of Customs) Decree list items that are prohibited from importation: drugs (including poppy) and tools for their distribution, modification and use or promotion, pornography, counterfeit jewelry, and precious metals or alloys that do not display the correct purity, anti-state materials, materials or devices for the operation of games of chance. Weapons and various military materials cannot be imported without a special permit. The inclusion of items in the list of regulated or prohibited is subject to change and a violation may be qualified as a criminal offense. Therefore, it is recommended to check the classification of the item with the CICO – Customs Import Classification Office and for common types of goods. Documents Prior to March 31, 2000, an essential legal condition for import was pre-export inspection of goods by an independent agency. The Philippine government had an agreement with SGS for this purpose, but it has since expired. From 1/1/2000, the Philippines switched to the system of determining the customs value according to the rules of the WTO – Transaction values, i.e. the real price is the price paid. The end of the obligation of pre-export inspection for exports to the Philippines can be considered an important step in the liberalization of trade. In the following years, the government considered the restoration of pre-export inspection on all goods imported into the country. Efforts to smuggle certain types of goods into the country and customs evasion were cited as reasons. However, it has not yet been restored. The customs invoice should always contain the price divided by the EXW value of the goods, as well as transport, insurance and other expenses/fees. Tariffs Along with membership in the WTO, the Philippines has committed itself to a tariff reduction schedule. Check smber for agriculture and fishing facts of Philippines.

Forms and conditions of operation on the market

The permission to operate a representative office is issued by the Securities and Exchange Commission SEC on the basis of a document on the transfer of the amount for the operation of the office, a certified copy of the decision of the company’s board of directors to establish an office in the Philippines and the appointment of a resident agent, the agent’s consent to the appointment, the auditor’s certified balance sheet of the parent company for the previous year and a certified copy of an extract from the commercial register. In the case of a non-profit representative office, there is no need to register with the Board of Investment – BOI (Department of Trade and Industry). Czech companies have only recently experienced the registration of their own branches. The company BTL has its own registration in the country, as well as Home Credit (2013) and the organization People in Need (2014). Note: All Czech documents must be translated into English and superlegalized by the Embassy of the Philippines in Prague. The representative office does not make a profit and therefore does not pay income tax or VAT and is not subject to profit repatriation regulations. An individual who is not a citizen of the Philippines (regardless of length of stay) is subject to tax only on income from sources in the Philippines. The flat-rate tax rate for foreigners registered with “Regional or Area Headquarters and Regional Operating Headquarters of Multinational Companies” for income or per diems is 15%.

Marketing and communication

Considering the nature of the products of Czech companies, it is necessary to use the most appropriate means of promotion, which are other than aggressive advertisements for various types of consumer goods, cosmetics and the latest mobile phones. Appropriately and correctly placed advertising on radio, television, light or poster advertising on the street means a great support for the sale of advertised products, especially of a consumer nature. Philippine advertising agencies, copying examples from the US, promote products advertised across the board. Currently, the most advantageous and at the same time the most expensive advertising is during basketball games, which is the most popular sport in the Philippines. Radio advertising still plays a significant role, especially in poor provinces, as radio is more affordable than television for most Filipinos. Better radio signal coverage than television also contributes to this. Advertising in about 20 daily newspapers published in Manila is standard mass advertising, reaching about 10 million Filipinos daily. Manila Bulletin, Philippine Daily Inquirer, Philippine Star, and several local Tagalog newspapers are among the most suitable. Advertising in special specialist and professionally oriented magazines is also recommended. Random stickers are very popular among ordinary Filipinos. The distributed company promotional stickers are likely to appear on some traditional local means of transportation, the jeepney, and thus provide cheap and long-term promotion of the company / product among the general public. The Philippine Star and several newspapers in the local Tagalog language. Advertising in special specialist and professionally oriented magazines is also recommended. Random stickers are very popular among ordinary Filipinos. The distributed company promotional stickers are likely to appear on some traditional local means of transportation, the jeepney, and thus provide cheap and long-term promotion of the company / product among the general public. The Philippine Star and several newspapers in the local Tagalog language. Advertising in special specialist and professionally oriented magazines is also recommended. Random stickers are very popular among ordinary Filipinos. The distributed company promotional stickers are likely to appear on some traditional local means of transportation, the jeepney, and thus provide cheap and long-term promotion of the company / product among the general public.

Issues of intellectual property protection

The issue of intellectual property protection in the Philippines needs to be divided into 2 basic levels – intellectual property in industrial production and counterfeiting of consumer goods. The first level is the protection of intellectual property in industrial production. In this area, the Philippines is doing very well and has a very solid reputation compared to other Asian countries. In terms of its cheap labor force, the Philippines is a sought-after location for the production of many types of goods and components with a high demand for manual processing. The electronics industry can serve as an example. It is quite common for there to be several production halls on the premises of one local plant, each of which produces components for a different customer, with the protection of intellectual property being fully secured, as evidenced by the fact that that most of the world’s manufacturers have been using Filipino labor in this way for many years without the slightest complaint. The second level should be seen at the level of consumer goods, starting with clothes, fashion accessories, electronics, mobile phones and weapons, through pirated copies of music or movies, to, for example, copies of world-brand pistols. The Philippines is by no means exceptional among Asian countries in this respect. You can buy a pirated copy of practically anything at local markets, but it must be added that the country of origin of these goods is usually China. In connection with China, it is also necessary to mention the fact that a number of non-original goods that are put on the European market come from there, but administratively the Philippines is listed as the place of origin. EU officials in the Philippines have already investigated similar cases several times, but with very limited results.

Public procurement market

Despite ongoing privatization, the Philippine government remains a significant importer of goods purchased through tenders. Some purchases are made through departmental ministries (Departments), state agencies including universities and colleges, fully or partially state-controlled companies, government finance offices and local government units. The listing and further process of approval of bids is governed by Law No. 9184 or the so-called Government Procurement Reform Act (GPRA). All major projects with state participation or state guarantees are evaluated and approved by the National Economic Development Authority (NEDA), and in the last instance by the government’s Investment Coordination Committee, chaired by the president. A number of projects are initiated by a proposal from a supplier/investor (so-called unsolicited offer). According to the law, a tender for a competitive counter-offer can be announced, which, however, is often a formality due to the information and the clearly more advantageous position of the project proponent.

However, the proposer often does not avoid announcing the so-called “Swiss Challenge”, which in practice means that the content of its offer is published and the competition is asked to submit “more favorable” offers. A foreign supplier can participate in the bidding process through its registered office (Branch Office) or a local representative accredited by the relevant institution. Inclusion on the mailing list of the institution issuing the tender procedure is the first prerequisite for establishing contact based on a request with a copy of the company or branch registration document. Some shops, e.g. purchases of strategic materials and food, are carried out only by government institutions (most often the so-called Procurement Office) or organizations based on the accreditation of both partners. Imports of more significant supplies for the Philippine military, police, the fire department or the coast guard are carried out through the Philippine International Trading Corporation – a state-owned foreign trade company directly subordinated to the presidential palace. In the event that the delivery volume exceeds USD 1 million, the supplier must agree to a countertrade, offset or other similar form of trade, which is also interesting for the customer.

Payment terms, payment ethics and resolution of commercial disputes

Philippine law shall prevail upon judicial review. Repeated appeals against the judgment may lead to the dispute ending up before the Supreme Court. His decision is final. It is not uncommon for there to be frequent media lobbying during litigation. Non-traditional and violent methods of dispute resolution may also occur. The experience of some foreign companies indicates that even an impartial local court is influenced by the local environment and nationalism. E.g. a few years ago, the court rejected McDonald’s lawsuit for infringement of the trademark of their Big Mac product by the Filipino firm Big Mak, which also sells hamburgers. A new experience for Czech businessmen is the extortion scandal of the Czech company Inekon from 2014 in connection with negotiations on the contract for new trams for the Manila MRT3 line.

Visas, fees, specific conditions for traveling to the territory

Information on traveling to the Philippines is updated more often on the website of the Ministry of Foreign Affairs of the Czech Republic, which we recommend as a starting source of information and from which we also take this information. We also recommend that you check the current entry conditions in advance in light of the COVID-19 pandemic. Citizens of the Czech Republic can travel to the Philippines for tourism and business purposes without a visa, as long as their stay does not exceed 30 days. A valid passport, valid for at least 6 months beyond the expected period of stay in the Philippines, and a return ticket, if necessary, are required for entry. ticket to the next destination. No return, event. connecting tickets, passengers will not be allowed into the country. For tourist trips of more than 30 days or trips for other purposes, a visa must be applied for at the Embassy of the Philippines in Prague. Specific conditions for travel With regard to the security situation and the danger of abduction of foreigners, the Ministry of Foreign Affairs recommends that you exercise maximum caution during your stay in the Philippines. We also recommend checking the current news in the section “Current recommendations and warnings” on the website of the Ministry of Foreign Affairs of the Czech Republic. Due to the conflict between the Philippine government troops and the criminal Islamist terrorist group Abu Sayyaf, the MFA advises not to travel to (or ships in the vicinity of) the southwestern part of the Philippines to the islands of Basilan, Jolo, Sulu, Tawi Tawi and the western (Muslim) part of the island of Mindanao (avoid travel to certain area), to the eastern (Christian) part of the island of Mindanao, to the southern part of the province of Cebu (up to the municipalities of Badian and Dalaguete) and the southern part of the island of Palawan (up to Puerto Princesa) travel only in urgent cases (avoid non-essential travel). At the same time, we recommend avoiding gatherings of large numbers of people throughout the Philippines due to the risk of a bomb attack. Due to the focus of President Duterte and his administration on the “war on drugs”, we strongly encourage the citizens of the Czech Republic to avoid any association with drugs, from purchase and transportation to possession and personal use. Consumption of alcohol in public is prohibited – outside of designated restaurant facilities. We also draw your attention to frauds where citizens of the Czech Republic are drunk/drugged by local fraudsters, manipulated into an unpleasant situation (sex in public with a transsexual prostitute/physical violence/alleged unpaid expenses, etc.) in these situations they are recorded on video and subsequently blackmailed. We therefore recommend not moving -especially alone- after dubious businesses. The main tourist centers are the islands south of the capital, e.g. Cebu, Bohol, Mindoro and Boracay. As far as ordinary crime is concerned, it is similar to that in the world’s capitals. It is recommended not to sleep in hostels in shared rooms (shared/dormitory rooms), theft of passports and cash is common. In cities (mainly Manila and Cebu), extra caution is advised at night (incidents with taxi drivers are common) and poor neighborhoods should be avoided. When using public transport, especially buses and so-called jeepneys, armed robbery may occur. We strongly recommend using only registered taxi services (in Manila and Cebu they have their booths at the exit of the airport hall), as cases are beginning to multiply when unregistered taxi drivers take the client to a remote location where they rob him. It is recommended not to sleep in hostels in shared rooms (shared/dormitory rooms), theft of passports and cash is common. In cities (mainly Manila and Cebu), extra caution is advised at night (incidents with taxi drivers are common) and poor neighborhoods should be avoided. When using public transport, especially buses and so-called jeepneys, armed robbery may occur. We strongly recommend using only registered taxi services (in Manila and Cebu they have their booths at the exit of the airport hall), as cases are beginning to multiply when unregistered taxi drivers take the client to a remote location where they rob him. It is recommended not to sleep in hostels in shared rooms (shared/dormitory rooms), theft of passports and cash is common. In cities (mainly Manila and Cebu), extra caution is advised at night (incidents with taxi drivers are common) and poor neighborhoods should be avoided. When using public transport, especially buses and so-called jeepneys, armed robbery may occur. We strongly recommend using only registered taxi services (in Manila and Cebu they have their booths at the exit of the airport hall), as cases are beginning to multiply when unregistered taxi drivers take the client to a remote location where they rob him. In cities (mainly Manila and Cebu), extra caution is advised at night (incidents with taxi drivers are common) and poor neighborhoods should be avoided. When using public transport, especially buses and so-called jeepneys, armed robbery may occur. We strongly recommend using only registered taxi services (in Manila and Cebu they have their booths at the exit of the airport hall), as cases are beginning to multiply when unregistered taxi drivers take the client to a remote location where they rob him. In cities (mainly Manila and Cebu), extra caution is advised at night (incidents with taxi drivers are common) and poor neighborhoods should be avoided. When using public transport, especially buses and so-called jeepneys, armed robbery may occur. We strongly recommend using only registered taxi services (in Manila and Cebu they have their booths at the exit of the airport hall), as cases are beginning to multiply when unregistered taxi drivers take the client to a remote location where they rob him.

Traffic is one of the biggest problems in the Philippines, especially in the capital Manila. The capacity and technically inadequate transport system, the low technical level of the vehicle fleet and the indiscipline of drivers are the reason for frequent transport collapses. Therefore, in the case of agreed times for meetings, it is necessary to keep a sufficient reserve of time and to report any delay to your partner. City taxis can be considered the most suitable means of transport in addition to hotel taxis. There are plenty of them everywhere and they will stop at a sign. There are no long waiting times, except for real exceptions (peak traffic times, e.g. Friday afternoon and evening or Sunday evening). Taxis are still moving. Although all taxi drivers should use a taximeter when driving, in the case of foreigners, they often try to get several times higher prices without using a taximeter or with reference to the current deteriorated traffic situation (rain, traffic jam, etc.). If there is a taximeter in the car, it is necessary to insist on turning it on. The main means of public transport are jeepneys and buses. Colorful jeepneys decorated according to the taste of the drivers with various symbols are extended copies of former American jeeps produced in the Philippines in local workshops. It is one of the well-known symbols of the country. Several non-interconnected and completely congested LRT – MRT tram lines also operate in Manila, while the older trams of the Czech company ČKD still run on the MRT3 line. However, we do not recommend the use of trams, jeepneys and buses due to the problematic security, due to the possibility of armed robberies. The road network is inadequate on many islands and on the island of Luzon further north or south of Manila. The exit to the south of Manila is provided by the new toll Skyway, built over the older road, and the inner ring road in the city is the often congested EDSA road. To the south of Manila runs the tolled SLEX (South Luzon Expressway) connecting the city with the port of Batangas via the Star Highway and the shorter NLEX North Luzon Expressway to the north). In addition to the car, use long-distance air-conditioned buses. Before embarking on such a trip outside of Manila, we recommend that you inquire in advance about the passability of the road due to possible landslides and the quality of the respective bus company, due to the possible poor technical condition of the vehicles, non-compliance with traffic rules and driver rest breaks, and the related accident rate, especially during the rainy season. Air connections are also possible for longer distances when traveling outside of Manila. Larger cities can be reached by the Philippine airline PAL or CEBU Pacific, or by smaller companies such as Air Asia – Zest, Asian Spirit or SEAIR. There are also options for renting a small plane or even a helicopter with a pilot.

Employment of citizens from the Czech Republic

As a prerequisite for the employment of Czechs, or in general, foreigners need to obtain a work permit from the Ministry of Labor and Employment (AEP Alien Employment Permit – Department of Labor and Employment) and subsequently an employment visa (Employment Visa) from the immigration office. The rule should be to obtain a permit already in the country of origin, i.e. at the Embassy of the Philippines in Prague. Some companies resort to the illegal practice where an employee arrives on a tourist visa, starts working, and the company in the meantime secures the appropriate permits (and possibly pays the necessary fines for a temporarily illegal employee, for whom it already pays taxes and all fees). However, we strongly do not recommend this procedure, as it can throw a Czech citizen into the detention center of the Immigration Police of the Philippines for many weeks. The process of handling subsequent voluntary deportation takes several weeks or months and is financially demanding. Companies that participate in the use of special economic and export zones or participate in the implementation of the government’s investment priority plan (IPP) have easier conditions for the employment of foreigners. Alien Employment Permit Obtaining an AEP work permit is subject to the following conditions based on the information of the Department of Labor and Employment of the Philippines dated April 2014. Detailed information on the employment of aliens – www.ble.dole.gov.ph

Necessary documents:
Application Form for Alien Employment Permit (AEP);
Photocopy of passport with visa or refugee certificate (Certificate of Recognition for refugees);
Employment contract / Appointment or Board Secretary’s Certificate of Election (this is a company document informing, that which position the new employee should occupy);
Photocopy of the mayor’s permit to establish a business or, in the case of economic zones, a PEZA or ecozone certificate confirming that the company works in the ecozone area.
A photocopy of the valid work permit of the AEP foreigner in the case of renewal of the work permit. In some cases, the relevant department of the Department of Labor may decide that a foreigner may be employed by a Philippine firm or foreign office if it proves the necessity of his employment, i.e. the absence of an equivalent Filipino worker. In that case, the foreigner is required to train at least 2 Filipinos in his field of specialization.

Fees and Penalties Fee of PHP 8,000 for a work permit valid for one year or part thereof. An additional PHP 3,000 must be paid for each additional year or part thereof. The total number of years must not exceed 5 years. The fee must be paid when submitting the application for a work permit. If a foreigner works without a work permit or with an expired permit, he will be fined for one year or part of it.

The employment of local forces is relatively standard, potential dismissals, proving the necessity of dismissal and severance pay are mainly considered problematic. The labor law provides Filipinos with a salary that includes or is calculated from the following items:
minimum wage (plus COLA compensatory allowance),
thirteenth salary,
social benefits – SSS – Social Security System;
PhilHealth health insurance;
contribution to the Pag-ibig (Home Development Mutual Fund);
obligation to pay taxes;
entitlement to paid overtime and differential for night work.

In order to use the local force, its permanent and systematic control is necessary, it is necessary to take into account its low work efficiency, little independence and limited reliability. In many cases, the salary of the local forces is paid in half, i.e. twice a month, taking into account the not always great ability to plan the use of the salary for the whole month.

Fairs and events

  • Thu, 09 – Sat, 11 Jun 2022 · PHILCONSTRUCT Luzon · Virtual Event, Trade Show: Building and Construction · Mabalacat, Pampanga – Online
  • Thu, 16 – Sat, 18 Jun 2022 · Graphic Expo · Trade Show: Packing & Packaging, IT & Technology · SMX Convention Center, Pasay City
  • Tue, 21 – Thu, 23 Jun 2022 · Philippines Marine (PHILMARINE) · Trade Show: Industrial Engineering, Power & Energy · SMX Convention Center, Pasay City
  • Thu, 14 – Sat, 16 Jul 2022 · Philconstruct · Trade Show: Building & Construction · Waterfront Cebu City Hotel & Casino, Cebu – Online
  • Wed, 03 – Sat 06 Aug 2022 · World Food Expo (WOFEX) · Trade Show: Food & Beverages · SMX Convention Center, Taguig City
  • Tue, 23 – Thu, 25 Aug 2022 · Aquaculture Philippines (AP) · Trade Show: Agriculture & Forestry · World Trade Center Manila, Pasay City
  • Wed, 24 – Fri, 26 Aug 2022 · Medical Philippines Expo (Medical Phil) · Trade Show: Medical & Pharma · SMX Convention Center, Pasay City
  • Wed, 24 – Fri, 26 Aug 2022 · Livestock Philippines · Trade Show: Agriculture & Forestry · World Trade Center Manila, Pasay City
  • Wed, 07 – Thu, 08 Sep 2022 · The Future Energy Show Philippines · Trade Show: Electric & Electronics; Renewable Energy; Power & Energy · SMX Convention Center, Pasay City
  • Thu, 22 – Sat, 24 2022 · Interior & Design Manila · Trade Show: Home & Office · SMX Convention Center, Pasay City – Online
  • Mon, 14 – Tue, 15 Nov 2022 · ASEAN Solar + Energy Storage Congress & Expo · Trade Show: Power & Energy · Okada Manila, Parañaque City
  • Wed, 22 – Fri, 24 Mar 2023 · Water Philippines Expo & Conference · Trade Show: Environment & Waste; Air & Water Management · SMX Convention Center, Pasay City
  • Wed, 26 – Sat, 29 April 2023 · Philippine Suppliers and Manufacturers Exhibition. · Trade Show: Electric & Electronics; Industrial Engineering; Aeropsation · World Trade Center Manila, Pasay City

Philippines Market Entry