5 Challenges foreign business owners face in the Philippines

5 Challenges foreign business owners face in the Philippines

There are plenty of reasons why foreign entrepreneurs choose to do business in the Philippines. Strategic location in Asia aside, there is strong consumer demand from a growing middle class and a sustained 6.4% annual growth for nearly a decade in the country. On top of all that, the Philippines is home to a highly competent and English-speaking workforce, providing businesses a strong talent pool to draw from. But when foreign business owners encounter the Philippine regulatory environment for the first time, a few headaches are bound to be expected. 
If you’re thinking about how to put up a business in the Philippines, anticipate good and challenging scenarios that will test your entrepreneurial chops. Below are five common yet solvable business challenges that you might encounter according to the World Bank’s Doing Business 2020 report and rankings.

Tax compliance

The process of paying taxes in the Philippines can be complex and time-consuming. According to the World Bank, the Philippines ranks 95th out of 190 countries in terms of ease in complying with tax requirements. Within the East Asia and Pacific group the country is 13th in this category. 
To avoid getting entangled in this web, hire a seasoned accountant or accounting team well-versed in the intricacies of the Philippine tax system. 
It’s worth noting, however, that major reforms have been applied to the Philippine tax system in recent years. The passing of the Tax Reform for Acceleration and Inclusion (TRAIN) law in late 2017 and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill in early 2021 have helped streamline processes and brought down tax rates.

Enforcing contracts and intellectual property

The World Bank has the Philippines at the 152nd spot in global rankings and 18th in the East Asia and Pacific region when it comes to enforcing contracts. Pursuing a lawsuit in the Philippines takes a lot of time and money. Some business and consulting experts estimate that it takes approximately over two years to enforce contractual obligations. 
This challenge can spill over into the realm of intellectual property (IP) protection. Obtaining search warrants can be delayed by varying standards of evidence required depending on which trial court you seek out. 
While the Philippines has made some efforts in effectively prosecuting contract violations and discouraging IP infringement, there is still much room for much improvement.  

Accessing credit

Getting credit can also be challenging in the Philippines. 
Loans from the country’s biggest banks remain the ideal source of financing. You can often take advantage of the best interest rates from these institutions. That said, qualifying for a bank loan can be tedious.
Even if you meet all the standards and requirements, getting approved can take several months. This is one of the reasons why the World Bank ranked the Philippines 138th worldwide in terms of getting credit. 
The Philippines still has a lot to do in terms of capturing more insightful credit information and expanding coverage. Doing so will enable more businesses to access financing. 

Recruiting the right talent

The Philippines is an obvious choice for many foreign entrepreneurs who want to start a business abroad. The country is home to a young and educated workforce that’s also proficient in English.
However, this doesn’t mean that qualified applicants will immediately line up in droves to join your company. It can take several months or even a few years to find the right talent for your team. Fortunately, you can hire trusted recruitment firms to help you navigate the recruitment landscape.

Cultural differences

Aside from challenges with the Philippines’ regulatory and operational requirements, there are also cultural nuances that may have to adjust to. 
For instance, you may notice or discover that a lot of Filipino professionals take an indirect approach towards communication. They are also mostly non-confrontational and try to avoid conflict as much as possible.
It’s always helpful to spend a good amount of time building rapport and relationships through informal but meaningful conversations. Consider hosting after-work dinners, casual team lunches, and team building exercises. These avenues can improve your understanding of each other’s working and communication styles. Get to know them and let them get to know you, too.

FilePino offers creative business solutions 

Whether it’s helping you stay on top of tax obligations, payroll, recruitment, or business registration, FilePino has you covered. Our team is composed of experts with decades of experience in helping domestic and foreign businesses set up shop here in the Philippines. 
Get in touch with us today at +63.917.892.2337 or contact us here to learn how we can assist you in your entrepreneurial endeavors.