Sao Tome and Principe - Executive SummarySTP - Executive Summary

The island nation of São Tomé and Príncipe (STP) is situated in the equatorial Atlantic in the Gulf of Guinea.  STP is taking positive steps toward improving its investment climate and making the country a more attractive destination for foreign investment.  STP is a stable, multi-party democracy and the government is working to combat corruption and create an open and transparent business environment.  An investment code, enacted in 2007, sets forth a modern 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 considerably less burdensome to start a new business.  An anti-money laundering / counter-terrorist financing law adopted in 2013 brought STP into compliance with international standards.  With limited domestic capital, STP relied 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 foreign investment is needed for STP to realize its development goals and potential.  Foreign investors, however, face challenges identifying viable investment opportunities due to STP’s weak domestic economy, inadequate infrastructure, small market, and physical isolation.  STP is one of the poorest countries in the world.  The World Bank estimates STP’s population at roughly 186,300 and its 2014 gross domestic product at around USD 337.4 million.  Due to STP's very limited revenue sources, foreign donors finance roughly 62 percent of its budget.  STP's main sources of foreign assistance are Taiwan, Angola, and Nigeria.  Tourism, fisheries, infrastructure, and agriculture present the most promising investment opportunities.  STP’s extensive maritime domain might present opportunities for hydrocarbon production as technology improves, but falling petroleum prices are curbing interest in new exploration.  Seeking to capitalize on its strategic location in the Gulf of Guinea, STP’s government has long sought to attract investment for a deep-water port.  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.  President Manuel Pinto da Costa supports increased foreign investment and welcomes closer U.S. engagement on economic matters.  Free and fair legislative and municipal elections held in October 2014 led to a peaceful transition of power to a new government led by the Independent Democratic Action party.  Prime Minister Patrice Trovoada, who assumed his position on November 28, 2014, is focused on economic growth and attracting foreign investment.
 

Table 1

Millennium Challenge Corporation Country Scorecard

The Millennium Challenge Corporation (MCC), a U.S. government entity charged with delivering development grants to countries that have demonstrated a commitment to reform, produced scorecards for countries with a per capita gross national income of USD 4,125 or less.  A list of countries/economies with MCC scorecards and links to those scorecards is available here: http://www.mcc.gov/pages/selection/scorecards.  Details on each of the MCC’s indicators and a guide to reading the scorecards are available here: http://www.mcc.gov/pages/docs/doc/report-guide-to-the-indicators-and-the-selection-process-fy-2015.