Introduction

As the Philippines moves away from its traditional agricultural society to technology-based industries and the field of knowledge process outsourcing (KPO), the government and individual businesses are trying to create a hospitable environment for pursuing opportunities. Though you may encounter government bureaucracy in the course of negotiating a business deal, building a strong personal relationship with your partners—essential for any successful negotiations in the Philippines—will provide a smooth way through obstacles.

Keep in mind that Filipinos are very nationalistic and proud of their success as an independent country, and their culture considers mutual respect to be of primary importance. In the course of negotiating, be mindful that your partners are likely to communicate indirectly, and they may take offense at speech that is considered too blunt.

Goal of Negotiations

Filipinos feel that the real strength of an agreement lies in the personal relationships of both sides. Negotiations are between people, not companies. You should endeavor to keep the same members on your negotiating team so that you can leverage the value of ongoing relationships as they develop.

Of special importance to Asian-oriented businesspeople is the concept of “hiya,” which can best be described as either shame or loss of self-esteem. Publicly embarrassing or insulting the character of another person, even inadvertently, can cause irreversible damage to the business relationship.

The issue tends to be less significant for businesspeople who are more experienced with the American style of negotiating. In those situations, things are said without much thought and feelings are hurt, but they don’t affect the overall outcome of the discussions. In any case, both anger and impatience should be avoided, as these are interpreted as a sign of weakness in one’s position and will be exploited by the opposing party.

Attitude

Filipinos are determined but honest bargainers. Because their country is constantly playing catch-up to the big Asian powerhouses, they believe their success depends on a win-win solution. The ultimate goal will be a long-term relationship with mutual benefits for both parties.

Whenever your counterparts lose sight of this fact, it may be advisable to stress your success in the international market, and in Asia in particular, as well as to show a long-term commitment to their country. After centuries of exploitation by foreign colonizers and investors, Filipinos are suspicious of ventures that are too obviously meant for nothing more than your own profits, and they tend to recognize the value of mutually beneficial relationships.

Filipino negotiators avoid openly aggressive or deceptive techniques, and if you encounter that kind of approach, you should respond in kind. As always, you need to verify with an outside source all the information that you receive from your counterparts, but generally you will find that game-playing with facts will be kept to a minimum.

Personal Style

As with other relationship-based societies, you will need to spend time getting to know your Filipino counterparts. The older, Asian-oriented businesspeople will want to spend more time in the process than the younger staffpeople who have more experience in American business customs. In either case, don’t think of this as wasted time, since you may reach the point where difficult decisions have to be made and it is only because you have a personal relationship with your counterpart that the impasse can be overcome.

Reasonable gift giving in business settings is acceptable, but because accusations of bribery and corruption are commonplace, you should be very careful about committing any questionable acts in this regard.

Communication Style

Communication in the Philippines can vary from vague and indirect among older, more traditional businesspeople to crisp and direct among the younger, more Western entrepreneurs. With both groups, however, openness develops over time and as the clarity of the win/win goal becomes a reality.

Filipinos have trouble directly saying “no.” Instead, they will try to be polite and say, “I’ll try and will let you know.” In that case, they will probably not let you know, in the hope that the issue will simply fade away. Filipinos don’t like to deliver bad news, and will often say nothing. If you are confronted by this behavior, it is best to confront it directly and in a diplomatic way try to identify the basic issue that is causing the confusion and mixed messages.

The indirect style of communicating is much less of a negotiating strategy than it is a basic characteristic of Filipino culture.  Rather than getting frustrated by the lack of straightforwardness, try to use this to your advantage by being patient and letting the process run its natural course.

Time Sensitivity

Filipinos are of different minds on the issue of timeliness. Those individuals who either come out of a Western tradition or have interacted extensively with Westerners tend to approve of negotiations that move along swiftly. On the other hand, negotiators from Asia, usually of Chinese background, feel that a quickly moving process results in bad decisions. They will tend to slow things down, not necessarily to win their case, although that would be acceptable, but more so that thoughtful decision making can take place.

The only one acceptable reaction to this style is patience. Without it you will be considered unworthy of the benefits of a long-term relationship. In short, if you don’t have the patience to stay with negotiations until a final agreement, how can you be expected to perform on the ultimate contract and make the necessary deliveries on time? This may not be how you look at the situation, but it will undoubtedly be the way the Filipinos do. The bottom line is that your patience will be considered a measure of your commitment to forming a meaningful personal relationship and that is essential to getting the deal done.

Emotionalism

The Filipino personality is very expressive and demonstrative. Once a relationship is established, a Filipino negotiator can be expected to develop an emotional commitment to the outcome as well as to working long-term with you and your company. Obviously, this is a beneficial development, as it supports their win/win orientation. For many foreigners, this personal touch may be confusing, because it tends to blur the line between business and social transactions. Don’t be surprised if after the agreement is signed you are invited out to dinner or an evening’s entertainment, or to one or more of your counterparts’ family gatherings. Refusing to attend is considered bad manners.

When making decisions, Filipinos often let their personal feelings and prior relationships take precedence over more practical considerations. Nepotism is not only common, it is often considered an automatic part of every agreement. You will be asked to purchase from companies owned by relatives and even hire family members who may know nothing about your product. The Filipino businessperson may consider this to be your price for doing business in his country. As with bribery, you and your company need to have clarity about your response before the negotiations begin, and you should convey that position to your counterparts as soon as possible.

Risk Taking

Generally speaking, Filipino businesspeople are not high risk takers, and considering the ever-present potential of civil unrest in their country, they will tend to spend additional time deliberating on the reasonableness of their decisions.

One factor to keep in mind is lagay (bribery), which is technically illegal, but a normal part of many transactions. Bribery is so built in to the national psyche that it’s hard to imagine the Philippines without it. Frequently, kickbacks will already be built in to a contract price, often representing 5 to 10 percent of the contract’s value. This aspect of business is best handled privately within your own organization and before you begin negotiations.

Team Organization

Philippine business is not known for group decision-making, particularly in family-run enterprises, although this is gradually changing. This may seem contradictory, given the usual stress on consensus, but businesses are often run as fiefdoms—a holdover from the Spanish colonial era. Often the head decision maker will not be present for most of the negotiations and will only appear, if ever, at the final session.

To add to the generally slow decision-making process is the ever-present influence of the government bureaucracy, a holdover from the time when companies were nationalized and there was more autocratic control of the economy. With extensive privatization this is no longer the case, but elements continue to linger in many sectors, which can always be an unexpected cause of delay. Generally your hosts will know how to handle this situation better than you do. 

Agreement-Building Process

Traditionally, because the Filipinos believe in long-term relationships, they can be expected to also see the bigger picture in negotiations. You can count on spending time discussing every detail of the agreement, but disputes at this level should not affect the overall direction of the negotiations or call the personal relationships into question. On the other hand, because of the presence of so many powerful competitors in the region, Filipinos are increasingly at an economic disadvantage and can be expected to cut deals that may have only short-range benefits. This development has both advantages and disadvantages, and you will need to determine how you company can best maximize its position.

Filipinos are not generally known as hard bargainers. There will be the typical need to exaggerate your initial offer while moving slowly toward the middle, but the gap between opening and closing will be much smaller than it is in countries with reputations for tough bargaining.

Filipinos are prone to a sort of multitasking that may be distracting to people from more linear business cultures. Meetings may be interrupted by cell phone calls, checking text messages, and secretaries with matters of low priority. You should keep in mind that you have no control over the situation, and the best thing you can do is check your own e-mail during the interruptions. Recognize that this is not a negotiating strategy to break your spirit, but just a habitual way that Filipinos do business. Stay focused and take notes so that after the interruption you can return to your agenda.

Agreement Form

Putting understandings into writing after many meetings and negotiation stages is essential, because of the unreliability of verbal statements. Some Filipinos are capable of concluding an agreement on a handshake, but you should avoid the temptation to do so. As difficult as it may be to reduce understandings to a fixed document, the effort must be made.

Filipinos tend to generally follow the American practice of employing attorneys to write detailed contracts. Enforcement procedures are substandard in the Philippines and, if at all possible, try to conduct any necessary litigation in either the United States or in your own country. This may also be beneficial to your counterparts, and they may easily agree. Lawyers are not disparaged in the Philippines and, although they will not generally be invited to the initial meetings, you probably will be able to bring them in as you get closer to writing down the agreement.

The assessments detailed in this article are intended for informational purposes only. They reflect typical attitudes within a given country or culture, and are not intended to describe any specific individual or business. World Trade Press is not responsible for any action taken on the basis of the information contained herein.

World Trade Press would like to acknowledge the research of Jeswald W. Salacuse (“Ten Ways That Culture Affects Negotiating Style: Some Survey Results,” Negotiation Journal, July 1998, Plenum Publishing Corporation) as the basis, with modifications, for the assessment categories described in this article.