You have to admit, the allure of labor rates fifteen times less than the developed world is going to make you think that making money by producing in the Philippines for export to the high wage countries is going to be easy. Well, it will be if you are patient enough, tough enough, and have deep enough pockets to run the gauntlet.
Uh, what gauntlet?
First off regardless of the law for export enterprises you are going to have to take a local partner or use some local incorporators including a Filipino corporate secretary. Yes, you will be a god send to their life and their families’ life as you can afford to pay the mandated minimum wage, about a third more than these same folks will earn working for a local company. Yes these local companies are also subject to the minimum wage rates but they prefer to bribe the local officials instead of doing things legally so when a worker complains the complaint doesn’t get filed, so you have sales girls working 11 hour days for 160 pesos and grown men earning 250 pesos per day doing hard construction labor. Contract labor, no benefits, six month’s work and off a month or find another job.
So you pay them a third to twice what they can make locally, full benefits, cover the cost of the ridiculous pre employment requirements, and probably have to cover the cost of their NSO and worse as many of them have no birth certificate at all. And be careful with those birth certificates as with three siblings in a four sibling family will have three different spelling of the family name. Papa Dong either was drunk when he filled out the form to report the birth of the child or he simply does not know how to spell his own last name. Then things are fine as you spend the next year or so spending money, building up a container load of merchandise.
Then you ship the container….and all of a sudden you are getting rich while they do all the work so they quit their job after you refuse to double their pay. Doesn’t matter that you won’t hit a positive cash flow for months to come or that you immediately begin pumping the lion’s share of the cash into the next container load. The fact that they were doing better than they had ever done isn’t going to sink into their moronic skulls. So back to the SEC to re-file the paperwork as partnerships don’t survive legally if one partner pulls out or you re-file the corporate paperwork to reflect the new corporate secretary.
But long before you got to this point you dealt with CPAs that weren’t CPAs actually and fended off numerous attempts to wildly inflate fees for filing or notary service or accounting charges. Because the second they see white skin the prices will triple and their faces will fall once you tell them you know the local prices for such things and will not be doing business with them anymore.
You managed to open a bank account despite the fact that you need a TIN number for the business yet you can’t get the TIN number because the BIR requires the completed SEC paperwork and you can’t get the SEC paperwork completed because they require a bank deposit to “prove” that you have adequate funding. And how do you solve this impossible dilemma? The SEC allows you to put the money in someone else’s bank account so they can query the bank and confirm there is money in the account. Now what can go wrong with putting money in someone else’s bank account in the Philippines? Lord knows that fixing the law to repair this impossible process isn’t being considered.
Then you probably need to fire the corporate secretary already for embezzlement so time to file the required SEC 17-C forms with the SEC. Nope, they won’t accept them, no such forms you are told by the SEC despite the fact that the SEC has the forms available for download on their website. Instead you are told to update the GIS, the General Information Sheets, but you can’t because you haven’t filed your annual meeting report yet. Why not? Because you just formed the corporation a few months ago and it is another ten months till the annual meeting is supposed to be held. And when are you supposed to actually file the GIS sheets by law? After the annual meeting of course, in ten months. The work around is…. to file an affidavit of non meeting. A notarized sheet of a paper stating that you didn’t hold your annual meeting because (a): it can’t be held under the corporate bylaws until the following year in 2016 and (b): you didn’t need to hold the meeting until the SEC refused to accept the legally required Sec form 17-C informing the SEC of a change in company officers.
At some point you procured a building because for some odd reason you have to have a plant address prior to registering with the SEC but who is going to hold a building for you for two months while the SEC and the PEZA folks drag their feet on setting everything up? No one, so you rent the shop and it sits empty.
Then you go to get the electric turned on. No problem, pay a deposit, the power is still on from the last tenant, all they have to do is finalize a bill and start sending you a bill, right? Nope, bring original blue prints of the building, an electrical plan, a detailed list of machines along with amperage requirements and placement, a survey by a licensed electrical engineer, company profile, profile for company officers, notarized board resolution appointing the corporate secretary to do business for the corporation (and what else is it that a corporate secretary does?), copies of the lease, site development plans, a vicinity map of the building. Ready now, right? Two weeks later you have all of this gathered up and they can turn the power on, right? Nope, the previous Dong hasn’t paid the bill in three months so they can’t turn the power off or change the account to your name until he has properly “closed” the account. One would think that three months of nonpayment would send the message that the business is closed and the electric company would be eager to get a paying client but you have to track down Dong and convince him to sign a notarized statement saying it is okay to change the name of the account owner.
Of course the building failed the electrical inspection in the process. After pulling the breaker panel cover you see #8 aluminum cables that have run 100 yards to the building, cables that have been there since the building was built fifteen years earlier, but they are feeding a 200 amp panel. So you downgrade the panel to a sixty amp service or you pay to run cables three times larger. At this point you are wondering how the Dongs in the past managed to get power turned on.
About now you want to get busy actually setting machinery and training workers but you can’t; there are a total of 28 other departments that you have to deal with before you are done setting things up. Perhaps ten to twelve requirements per department, here is one example for one department: application, copies of your lease, last year’s income tax return (you don’t have one, you just started the company), Mayor’s permit (you don’t have one as you are on a PEZA Zone), photo copy of a utility bill for that address in your name (you don’t have one, you just moved in), vicinity map, zoning clearance (you are in an industrial park for God’s sake), sworn and notarized notice of undertaking, sworn and notarized notice of allowing inspection and keeping records for the next ten years, certified and true copy of the latest GIS sheet (the one that isn’t filed until after the annual meeting in 2016), Certified true copy of your PEZA registration(and they are a PEZA department), Certificate of Good Standing from the SEC (which they will refuse to issue and tell you to use the SEC stamped GIS), profile for the company, profile for all officers, profile for every employee that will deal with said department, and of course the ubiquitous notarized affidavit of the board resolution allowing the corporate secretary to deal on behalf of the company with the department. And what are you to do about those items that are impossible for you to provide? You pay for another notarized letter for each item explaining why you can’t provide the requirement and promise to provide the requirement later. No, not one letter, five letters, one for each the impossible requirements.
So you finally get in the building, power is turned on, copious volumes of the same information has been deposited at a total of 29 places just at the PEZA complex and your consultant is still dealing with all the tax compliance accounts. Time to train Dongs and Dongettes.
Detailed instructions for the tasks and procedures is the key you are told. Older and wiser hands recommend you write up a procedures manual for each task. But the Dongs might be able to read English and speak English but they comprehend very little of it. Count on at least an hour to explain a simple task such as building something. Yes you sent pictures, yes you provided a detailed cut list for the parts, yes you laboriously produced detailed written instructions but no they didn’t follow the majority of the instructions because they didn’t understand them.
So they did it wrong and it needs torn down and redone. Dong and Dongette are now angry at you because they lost face. Everyone is threatening to quit if they have to redo the work. Their brains hurt you are told, sullen and resentful faces are the result of you using words such as parallel, perpendicular, or 2 x 4. Yes, they successfully built the same item three days before but the fact that this one should be made the same way never enters their mind.
The good news is that once you have them trained they will be content to put nut A on bolt B all day long without getting bored. They are genuinely challenged by simple tasks and find profound gratitude in a job that an American would grow bored of doing and quit. In the process they might well remind you of a simian attempting to procreate with prolate spheroid but resist any impulse to show them an easier way or God forbid… the correct way. Instead adopt the patience of a grandparent dealing with a Downs Syndrome six year old and remember that you are paying about 15 times less than the labor and tax rates you pay in your country and that Dong will show up for work six days a week.Published in