REDUCING MARKET DISTORTIONS FOR A MORE PROSPEROUS UKRAINE 29 Market concentration and regulatory protections can facilitate anticompetitive behavior. For example, a lack of clarity regarding the regulation of 昀椀rms with signi昀椀cant market power and the use of termination rates can encourage abuse of dominance in the 昀椀xed-line telecom market. Likewise, the absence of regulations or guidelines aimed at preventing collusion by trade associations could facilitate price 昀椀xing or market sharing. The current con昀椀guration of Ukrainian market institutions and their regulatory frameworks is inconsistent with ensuring competitive and e昀케cient markets. Even in markets were an inde- pendent regulator exists, SOE dominance and regulatory constraints can still inhibit competition. For example, without extensive SOE unbundling and regulatory liberalization of the wholesale electricity market, private investment in the generation and transmission segments will be inadequate and may even accentuate weaknesses in competitive neutrality and facilitate anticompetitive practices. Con- versely, regulatory reform may be insu昀케cient to foster competition in the absence of an independent sectoral regulator. The liberalization of certain transport subsectors (railways, ports) and telecom assets (spectrum allocation) may not facilitate market opening or accelerate growth without e昀昀ective sectoral regulators. In addition, inadequately enforced regulations in the mobile telecom and airport subsectors may undermine service provision and encourage anticompetitive behavior. Similarly, a lack of regula- tory clarity and transparency in the road transportation and 昀椀xed-line telecom subsectors may distort network investments, increase administrative costs, weaken incentives to comply with regulations, and potentially advantage larger or better-connected market players. Table 2, below, maps the impact of regulatory distortions and constraints on competition across sectors, and Box 1 identi昀椀es the potential gains from reducing regulatory restrictiveness in network industries and services. Beyond the aspects captured by the PMR, in practice: (i) the regulatory framework is implemented in a discriminatory manner in the network and enabling sectors, (ii) there is a lack of competitive neutrality, including in markets dominated by SOEs, and (iii) enforcement of the overall competition policy and law is not fully tackling anti competitive behavior. Unclear regulations and uneven or discriminatory enforcement increase administra- tive costs, weaken compliance incentives, and tend to bene昀椀t large 昀椀rms and incum- bents. Ukraine scores 5.8 out of 10 on the Bertelsmann Stiftung Transformation Index for market organization, lagging behind the average for comparator countries. The index measures the perception that clear rules are in place to guide stable, market-based competition. Moreover, numerous instances of discrimination have occurred regardless of the regulatory framework. For example, Ukraine International Airlines has historically received preferential rates for passenger transfers, aircraft service, and parking space at the country’s largest airport, the state-run Kiev Boryspil, as well as preferred parking space for aircraft and prime real estate in the airport termi- nals. In some market segments, such as airline baggage-handling services, the regulatory frame- work is limited, and enforcement is wholly inadequate.