Describing the business culture in the Philippines is a highly subjective affair, though there are some general traits that can be identified.
One may find that many will seek to avoid losing face in front of others. Expressions of anger, negativity and public embarrassment are best avoided especially when most will remain calm, friendly and rarely raise their voice. This includes direct confrontation. Many will avoid saying ‘no’. In fact some may respond with ‘yes’ or ‘maybe' even though they actually mean ‘no’. When given an ambiguous answer it may be useful to pose follow-up questions.
The word loosely translates to group loyalty. It refers to the social need for general consensus and partnership. During business negotiations it may be necessary to get everyone onboard before proceeding further. Such detailed negotiations are often used to avoid any misunderstandings.
Business Relationships and Networking
Conducting business in the Philippines is highly personalised. Filipinos prefer to do business with people they can relate to. Interacting face to face through frequent meetings and correspondence is often necessary to establish and maintain business relationships. While formal behaviour is important, it may also be necessary to maintain informal relationships. The use of intermediaries is common when networking and initiating business contacts.
Many large Philippine companies have a hierarchical structure. These are often controlled by a small number of families with a great deal of decision making power residing with family members and senior management.
Business cards are used extensively and an important part of networking. There are no clear rules as to when business cards should be exchanged. However, many will give and receive business cards using both hands. Many include their title and position in order to highlight their influence within a company or organisation.
A friendly and informal handshake is the most common way of greeting someone. It is common to shake hands with everyone when arriving and again when leaving.
Titles like Sir, Madam, and Mr., Mrs., or Miss + surname are used extensively. Some may also use titles associated with their occupation like Attorney or Doctor. Using someone’s first name is best avoided until an informal relationship is established.
Corruption is a major issue in the Philippines. International surveys rank the Philippines relatively low. Transparency International gives the Philippines a 2.4 ranking in its Corruption Perception Index (2010), with 1 indicating extreme corruption and 10 indicating no corruption. Transparency International’s Global Corruption Barometer (2010) provides an index based on the perception of how institutions are affected by corruption. The index runs from 1 to 5, where 1 indicates no corruption and 5 indicates extreme levels of corruption.
According to IFC Enterprise Surveys 2009, corruption can be more acute when dealing with public officials. Companies must be aware of bribes or ‘facilitation payments’ that may be expected in regards to licensing, permits and even taxes. Even though corruption is said to be less severe in the private sector, Social Weather Station’s Business Survey on Corruption (2007) reports that one out of every five company managers claim that bribes may be necessary to win contracts. The well-known World Economic Forum Global Competitiveness Report 2010-2011 also identifies corruption as a major issue for doing business in the Philippines. Overall the Philippines placed 85th out of 139 countries. This is relatively lower than the rest of the East-Asia.
Business Anti-Corruption Portal highly recommends that companies conducting business in the Philippines complete extensive due diligence and implement integrity systems before entering into contracts or partnerships in order to mitigate the risk of corruption.
The U.S. Department of State reports that the judicial system is seen as inefficient and its outcomes uncertain. Insufficient staff, delays and corruption remain significant factors. Many opt for alternative dispute resolution mechanisms.
There are several organisations that work on anti-corruption measures, such as the Makati Business Club (MBC), European Chamber of Commerce Philippines (ECCP) and Philippines Norway Business Council (PNBC). Membership in these organisations provides an opportunity to discuss problems and potential pitfalls with experienced investors. The Department of Finance has implemented an anonymous reporting system available on www.perangbayan.com. The Makati Business Club, in conjunction with other organisations, has several campaigns directed towards anti-corruption measures.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Corporate social responsibility has come to encompass many different aspects. At the core of the concept lies the responsibility of companies towards people, society and the environment that are affected by a company’s activities . For many companies in the Philippines, the formal use of the CSR concept remains relatively new. While many programs ex ist, they are often limited to issues that help society and the company’s reputation, such as poverty reduction programs. Other CSR aspects like legal compliance, ethical business practises and international standards remain largely ignored.
It is, however, more common to see fully fledged CSR programs implemented by larger companies. Some of the main reasons for this include influence from abroad, especially if the company has its headquarters outside of the Philippines, and if the company’s reputation is essential to secure market share. Small and medium-sized companies often participate in programs that contribute to their local community and their employees. Typical examples include livelihood training for those who cannot afford to go to school and come from poor families. Companies involved in textiles and arts and crafts are often concerned about abusive labour conditions.
CSR White Paper
An overall objective for the Embassy is to contribute and help Norwegian companies comply with the objectives outlined in the Norwegian white paper on CSR. For most Norwegian companies CSR has become an integral part of their business practises and has proven to be an asset.