On the second day of the Philippine Business Conference at the Manila Hotel, Neri said these targeted reforms to reduce business expenditures eventually can lead to two things — very high profit or lower prices.
"Cost reduction can also be converted to consumer welfare, so we can reduce the inflation rate," Neri said.
Microeconomic reforms are industry-to-industry type of reforms. "I call these the hard reforms because at each stage, you have to face well-entrenched, vested interest," Neri said in a previous interview.
For example, he said agriculture sector reforms should include the removal of quantitative restriction in tariffs of products such as sugar and corn.
Neri explained that tariff revenues can be used to support farm productivity, making the product more responsive to changes in the market.
He likewise said the food supply chain must be improved by removing restrictive regulations, working towards more efficient shipping, building more farm-to-market roads, and enhancing irrigation support.
Aside from microeconomic reforms, Neri said another way of reducing the cost of doing business is by eliminating regulatory capture.
"Regulatory capture happens when the regulators seem to be influenced by the people they are regulating and they make decisions to favor those they are regulating," Neri explained.
Neri cited the Civil Aeronautics Board (CAB), the Philippine Ports Authority (PPA), Maritime Industry Authority (Marina), National Telecommunications Commission (NTC) and the Energy Regulatory Commission (ERC) as agencies prone to regulatory capture.
For example, Neri said the strict airline policy restricts tourism. "We cannot bring enough tourists because airline policies tend to be restrictive," he said.
Neri proposed liberalizing airline policies by allowing more flights to come in.