26 REDUCING MARKET DISTORTIONS FOR A MORE PROSPEROUS UKRAINE in addition, domestic prices for certain internationally traded food commodities do not appear sensitive to global price changes, suggesting that domestic distortions may limit the pass-through e昀昀ect of imports.45 An analysis of various food commodities reveals that domestic prices for rice and sugar do not respond to international price changes. The insigni昀椀cant impact of international prices on domestic prices may re昀氀ect price regulations, which applied to 46 these two food products and many others during the period under analysis. Rather than acting as a ceiling to keep staple food prices a昀昀ordable, Ukrainian price regulations may actually have served 47 as a 昀氀oor, preventing downward price adjustments due to import competition. In August 2016, the government launched a pilot project eliminating state price regulation on most of the food products, and in July 2017 these price regulations were permanently lifted. Reforming Ukraine’s Regulatory Policies and Market interventions Can Reduce Distortions and improve Outcomes for Firms and Consumers Many Ukrainian markets lack adequate competitive pressure to ensure e昀케ciency, and government interventions play a major role in shaping market outcomes. Given the pro- pensity of SOEs and politically connected 昀椀rms in concentrated markets to lobby for regulatory protections or undue advantages, the design and implementation of government interventions have a major impact on economic e昀케ciency. In this context, aligning economic policies with competitive- neutrality principles will be vital to restart productivity growth. Competitive neutrality is espe- cially critical in upstream sectors and markets that are not naturally conducive to contestability, as even minor distortions or regulatory barriers in these areas can negatively impact economy-wide productivity and competitiveness. Excessive state control over the economy and the prevalence of barriers to entry in net- work industries are major obstacles to competition. Ukraine’s aggregate Product Market Regu- 48 lation (PMR) indicator is broadly comparable to the OECD average (Figure 27). However, regulations 45 A pass-through analysis was conducted to determine whether domestic prices of rice, sugar, sun昀氀ower oil and wheat 昀氀our respond signi昀椀cantly to di昀昀erences between international and Ukrainian prices and, if so, to determine the speed of adjust- ment and whether upward and downward price adjustments are symmetrical. International prices were obtained from the World Bank’s Commodity Price Database, and Ukrainian national average prices were obtained from the World Food Program. 46 Price data are from March 2014 to December 2017. 47 National Investment Council. 2017. https://mfa.gov.ua/media昀椀les/sites/uae/昀椀les/NIC_Middle_Year_Report_2017.pdf 48 The OECD-WBG PMR data are part of the WBG’s Markets and Competition Policy Database. Each area addressed within the PMR methodology sheds light on speci昀椀c restrictions of the regulatory framework, both economy-wide and in key sectors of the economy. These areas include: electricity; gas; telecommunications; post; transport; water; retail distribution; professional services; other sectors; administrative requirements for business startups; treatment of foreign parties; and other issues such as SOE governance or antitrust exclusions and exemptions.