The island nation of São Tomé and Príncipe (STP) is located in the equatorial Atlantic in the Gulf of Guinea. STP is gradually taking positive steps toward improving its investment climate and making the country a more attractive destination for foreign direct investment (FDI). STP is a stable, multi-party democracy and the government is working to combat corruption and create an open and transparent business environment. To facilitate the tax receipts and enforcement, STP enacted a Value Added Tax (VAT) Law (13/2019), which will come into force in September 2020. A modern Labor Code (6/2019) enacted in April 2019, is designed to make labor standards easier for investors to understand and implement. In June 2019, STP became the 25th African country ratifying the African Continental Free Trade Agreement (AfCFTA). The first ever Public Private Partnership (PPP) Law, the new Notary Code and the Commercial Register Code entered into force in 2018; the Regulation of Investment Code adopted in 2017; the new Investment Code and the new Code of Fiscal Benefits and Incentives were adopted in 2016. Together, these laws and related regulations adopted in the past year provide a more modern, attractive, and transparent legal framework for foreign investment. A Millennium Challenge Corporation Country Threshold Program, implemented from 2007 to 2011, modernized STP’s customs administration, reformed its tax policies, and made it less burdensome to start a new business. An anti-money laundering and counter-terrorist financing law adopted in 2013 brought STP into compliance with international standards. With limited domestic capital, STP continues to rely heavily on outside investment and as such is committed to taking necessary reforms to improve its investment climate.
The consensus among government authorities and economic analysts is that considerable FDI is needed for STP to realize its development goals and potential. However, foreign investors, face challenges identifying viable investment opportunities due to STP’s weak domestic market, inadequate infrastructure, small market, slow justice system, high cost of getting credit, and limited access and as well as the high cost of electricity. STP is a developing country with gross domestic product (GDP) of roughly $422.2 million and a population of 211,028 according to 2018 World Bank estimates. Due to STP’s very limited revenue sources, foreign donors finance roughly 90 percent or more of its budget. For the 2019 state budget, STP’s main sources of foreign assistance were China, Equatorial Guinea, Japan, Portugal, the World Bank, European Union, FAO and the African Development Bank. Creating “robust economic growth” focusing in the provision of services, including tourist, financial, technological, logistics, and health service associated with digital economy, is one of the four axes of the four-year Government program approved December 2018. Special attention will be also given to traditional sectors, mainly agriculture, livestock and marine resources. The STP’s extensive maritime domain (160,000 km2) might present opportunities for hydrocarbon production as technology improves. Seeking to modernize its port infrastructure and capitalize its fishing potential, under Sino-STP cooperation signed in 2016. In early 2019, the Government announced advanced negotiations with China for the construction of a multifunctional commercial port. Additionally, in November 2019, the Ministry of Public Works launched an international public tender for the construction of a deep-water port in Fernão Dias, Lobata District, north of STP, under a public-private partnership model. STP also announced Chinese funding in 2020 for airport recertification and upgrades. With $29 million Word Bank support, STP will rehabilitate 27 km of road linking the capital São Tomé to the north of the island. As a former Portuguese colony, STP has strong economic ties with Portugal and other Lusophone countries including Angola and Brazil.
STP is politically stable, and the government and business community appear focused on building consensus to develop the country economically and to improve basic social services for the country’s young and growing population. STP has had peaceful demonstrations with a recent history of smooth political transitions. Free and fair legislative and municipal elections held in October 2018 led to a formation of new government led by the Movement of Liberation of São Tomé and Príncipe/ Social Democratic Party (MLSTP/PSD) in coalition with the PCD-MDFM-UDD coalition. Prime Minister Jorge Bom Jesus, who took office in December 2018 is focused on fighting corruption, improving business environment, attracting FDI and promoting economic growth. In July 2016, STP peacefully elected the president, Evaristo Carvalho; a member of the opposition Independent Democratic Action party (ADI). President Carvalho supports increased foreign investment and welcomes closer U.S. engagement on economic matters.
|TI Corruption Perceptions Index||2019||64 of 180||https://www.transparency.org/
|World Bank’s Doing Business Report||2020||170 of 190||https://www.doingbusiness.org/
|Global Innovation Index||2019||Not Ranked||https://www.globalinnovationindex.org/
|U.S. FDI in partner country ($M USD, stock positions)||2018||$21||https://apps.bea.gov/international/
|World Bank GNI per capita||2019||$1,960||https://data.worldbank.org/country/