Identifies common practices to be aware of when selling in this market, e.g., whether all sales material need to be in the local language.
Trade Promotion and Advertising
The Philippines is a brand-conscious market. Advertising plays a significant role in promoting the sale of most consumer goods, and several of the country’s top advertising agencies are affiliated with international companies. Several local advertising companies have emerged in recent years as advertising has evolved beyond traditional tri-media outfits and the variety of advertising channels increased exponentially.
Improved internet infrastructure in the Philippines had been driving the growth of the country’s internet population, which was among the highest in the Asia Pacific Region. A staggering 72% of the nation’s population are on the internet and internet usage is the highest in the region. On the average, Filipinos spend more than four hours using social media platforms. Considering the country’s strong digital presence and the online savviness of the population, a digital marketing strategy should be considered. Digital marketing specialists can launch product campaigns into a massive pool of potential customers and consumers while gathering valuable information on them at the same time. Social media influencers from the nano to the mega category are commonly used in new product launches. Some of the popular social media platforms include Facebook, Instagram, Tiktok, Twitter, and Viber. Google reviews, Vlogger reviews, and YouTube collaborations are also popular ways to generate brand awareness.
Although some advertisements in multi-channel campaigns utilize Western image models or concepts, many market segments are localized for product advertising and brand-building. The use of celebrities and social media influencers as endorsers is a well-tested and well-received formula for local advertising success.
In recent years, local trade promotion organizers have developed numerous industry-specific trade shows and exhibitions. These trade promotion activities cater to a wide array of sectors including construction, clean energy, health and lifestyle, furniture and home décor, food and food equipment, regional products, giftware, franchise opportunities, education, industrial goods, automotive, maritime and defense, sporting goods, apparel, telecommunications, as well as the IT sector.
Popular venues for trade fairs and expositions include shopping malls, trade halls (World Trade Center and Philippine Trade Training Center) and convention centers (SMX Convention Center and Philippine International Convention Center).
Typical retail markups average 30 percent of the invoice value. Markup percentages can range from a minimum of 7 percent to 10 percent for regulated goods such as glass and aluminum, to 10 to 15 percent for most consumer goods, and as much as 30 percent for high-end or luxury items. These rates enable distributors, wholesalers, and retailers to recover expenses incurred in importing equipment, raw materials, or finished goods, such as import duties, Value Added Tax (VAT), discounts to customers, commissions to company-employed agents and independent provincial dealers, warehousing fees, shipping charges (some are charged to the importer), and other Bureau of Customs fees.
Retailers typically earn a 20 to 30 percent profit margin on most non-food retail items, but margins may vary widely depending on mutually agreed sale terms and conditions.
Generally, all transactions involving the sale of goods, properties, and/or services are subject to VAT. VAT is imposed on the gross selling price (for purchase of goods) and gross receipts (for rendering services). Since February 2006, the Expanded Value Added Tax (EVAT) Law increased VAT from 10 percent to 12 percent across the board. The VAT on imported goods is based on the total value used by the Philippine Bureau of Customs in determining tariffs and duties.
In most cases, VAT is already credited at the final invoice price as it is billed to the buyer unless the exporter stipulates that it is not included. Typically, a foreign exporter will collect VAT from his Filipino buyer and remit the tax to the government. If the Philippine buyer re-sells the product locally, such as in a distributor relationship, the local re-seller passes the VAT onto the local buyer in the invoice price.
Sales Service/Customer Support
Philippine partners expect strong after-sales service and support from U.S. counterparts during and after the warranty period to ensure customer satisfaction and strengthen the brand name. U.S. firms typically provide after-sales service through their local representatives. Those with substantial sales in the Philippines often establish a branch office to strengthen local distributor and reseller support. Another alternative is supporting the Philippine market from a regional Asian office.
For government procurement of goods, the procuring entity requires warranty security to ensure that all manufacturing defects will be handled by the supplier.
Local Professional Services
Principal Business Associations
American Chamber of Commerce of the Philippines, Inc.
The American Chamber of Commerce of the Philippines, Inc. serves the interests of Philippine and American businesses through the participation of members in promoting their long-term objectives while contributing to the civic and economic development of the Philippines.
U.S. - ASEAN and Business Council
The U.S. – ASEAN Business Council supports the efforts of the American business community to do business in the Philippines. By working with the government, the Council has successfully advocated for the Philippines to adopt policy reforms to permit greater foreign investment in domestic energy sector, liberalize the telecommunications industry and address issues related to corruption and governance.
Philippine Chamber of Commerce and Industry
The Philippine Chamber of Commerce and Industry (PCCI) advocates for the growth and sustainable development of entrepreneurship, chamber development, international trade relations and business innovation. PCCI works with the government, local chambers, and other business organizations to promote Philippine enterprises globally.
Limitations on Selling U.S. Products and Services
The Foreign Investment Negative List (FINL) contains two lists of economic sectors where foreign participation in the Philippines is regulated. List A enumerates areas/activities where foreign ownership is prohibited or limited under the Philippine Constitution and specific laws, and List B specifies the areas/activities where foreign ownership is limited for reasons of security, defense, risk to health and morals, and protection of small- and medium-scale enterprises.
List A may be amended any time to reflect changes brought about by new laws while amendments to List B can only be made once every two years in accordance with Republic Act. No. 7042 or the “Foreign Investments Act of 1991.”
The Philippines is implementing the 12th Regular Foreign Investment Negative List released in June 2022.
The Philippine government procurement law — Republic Act (RA) No. 9184 — requires a foreign firm to have a local partner, with very few exceptions. Sections 18.104.22.168 and 22.214.171.124 - Eligibility Requirements for the Procurement of Goods and Infrastructure Projects , Section 24.3.3 - Eligibility Requirements and Short Listing for Consulting Services and Appendix 9 - Guidelines in the Determination of Eligibility of Foreign Suppliers, Contractors and Consultants to Participate in Government Procurement Projects of the 2016 Revised Implementing Rules and Regulations of Republic Act (RA) No. 9184 or The Government Procurement Reform Act for information on the few circumstances where foreign companies can bid directly on government tenders. Under RA 9184, a foreign corporation that won a bid should submit a Philippine Securities and Exchange Commission license to the procuring government entity before contract award. In case of a foreign corporation that will engage in construction activities, a special license from the Construction Industry Authority of the Philippines is required.