Philippines - Distribution and Sales Channels Philippines - Distribution and Sales
Metro Manila is the commercial capital of the Philippines. It is composed of 11 cities and is where the Philippines’ national importers and distributors are located. Within Metro Manila, Makati City, Ortigas Center in Mandaluyong City, and Bonifacio Global City in Taguig, are considered central business districts (CDB). These CBDs are home to many multinational company headquarters, commercial bank head offices, and high-end shopping establishments.
Outside of Manila, other major regional commercial centers are Province of Pampanga, Baguio City, Cebu City, Iloilo, and Davao. Cebu City, the third largest city in the Philippines, and Iloilo are the primary trading centers for the middle portion of the archipelago (the Visayas Region). Davao, the second largest city in the Philippines, enjoys a near-trade monopoly in Southern Mindanao, due to the numerous land and water connections to nearby provinces. The Port Statistics data released by the Philippine Ports Authority (http://www.ppa.com.ph/) shows a decrease in foreign ship calls to the Philippines from 11,883 in 2017 to 11,391 in 2018. Manila/Northern Luzon ports are still the leading destination for foreign ships with 4628 calls. Here is the breakdown of the 2018 foreign ship calls per region: Manila / Northern Luzon: 4628, Southern Mindanao: 2476, Southern Luzon: 2340, Northern Mindanao: 1099, Visayas with 848. Most of international cargo traffic is handled in the ports located in Manila; the Manila International Container Terminal (MICT), and South Harbor. MICT is operated by the International Container Transport System, Inc. (ICTSI), a Philippine-based international port operator with operations in 20 other countries (including the U.S.). South Harbor is operated by Asian Terminals, Inc. (ATI), a Dubai-based company.
Trucking companies are used to deliver goods from the port to warehouses and retail outlets. The large number of trucks has caused a huge impact on road congestion. The Government has resorted to truck bans on major roads in Manila during rush hour or in some areas from 5am to 8pm to help alleviate traffic. This has negative repercussions on the movement of goods in and out of Manila. There are efforts to promote the use of ports outside of Manila (Northern Luzon and Southern Luzon) to decongest the road network in the Capital.
The use of local agents or distributors greatly improves the opportunity for market success. There are currently two types of importers in the Philippines: stocking distributors and indenters. Stocking distributors are bound by a contract to buy and sell a prescribed number of items as stated in their agreement with the foreign supplier. Indenters, on the other hand, act as brokers between foreign suppliers and the end user, thus saving on capital outlays for expensive equipment and avoiding the need to stock high-priced products. Usually, a buyer who orders from an indenter already has the financing for the goods. Customers will often open a letter of credit (L/C) for direct purchase from a foreign exporter. Under these arrangements, the local representative or agent gets a commission for the sale, known as an indent sale. Indenters also handle after-sales service support.
In selecting local firms as agents, a U.S firm should consider whether the local firm is an accredited vendor of its target customer(s). Several large Philippine corporations have a “vendor accreditation process” in place. Only those listed as an accredited vendor are informed of upcoming procurement projects. For Government projects, potential local distributors should be knowledgeable on relevant Philippine and U.S. laws, specifically, Republic Act (RA) No. 9184 or the Government Procurement Reform Act (GPRA), and the U.S. Foreign Corrupt Practices Act (FCPA). U.S. companies should work with a local firm that has experience participating in Philippine Government bids. Many U.S. firms use the U.S. Commercial Service’s International Company Profile (ICP) program to assess a prospective agent’s capability and reputation in the market.