EXECUTIVE SUMMARY The following report is designed to support the Government of Ukraine as it strives to pro- mote robust and sustainable growth through market-based reforms. The report examines Ukraine’s market conditions, regulatory framework, and approach to government intervention in terms of their consistency with vigorous competition and economic e昀케ciency. The report’s 昀椀ndings inform a set of policy solutions to help Ukraine achieve its growth potential and create inclusive eco- nomic opportunities. As it attempts to accelerate its economic recovery in the wake of the recent crisis, Ukraine has substantial scope to increase productivity by enhancing competition and implement- ing market-based reforms. Between 2010 and 2016, Ukraine’s annual total factor productivity (TFP) growth rate averaged just 0.9 percent, and the contribution of TFP to GDP growth was negative. The country’s industrial sector and export structure are resistant to change, and both remain focused on older industries such as steel, machine-building, and chemical production despite their low levels of productivity. Meanwhile, in昀氀ows of foreign direct investment have been very modest, especially in export-oriented manufacturing. Small and medium-sized enterprises play a limited role in Ukraine’s economy, and larger 昀椀rms and business groups dominate most sectors—suggesting that competi- tive, market-driven processes of entrepreneurship, innovation, and productivity growth are not func- tioning properly. Firms’ perceptions of the power wielded by vested interests and the prevalence of cronyism, anticompetitive practices, and discrimination against foreign 昀椀rms further underscore the country’s distorted playing 昀椀eld. Addressing these challenges through pro-competition reforms that increase market con- testability and sharpen incentives to allocate resources e昀케ciently could accelerate eco- nomic growth and promote broad-based development. Recognizing the need to increase productivity through private-sector-led growth, the government has begun implementing a set of market-oriented reforms. However, more must be done to build a modern market economy capable of generating robust, sustainable growth and shared prosperity. Ukraine’s markets are concentrated, as government interventions and regulatory barriers—combined with the dominant role of state-owned enterprises (SOEs) and the power of politically connected 昀椀rms—limit entry and distort competition. The wave of privatizations in the 1990s shifted the ownership of former state monopolies to politically connected private interests, but they did not create fully open or contestable markets, and subsequent 1