Executive Summary

The island nation of Sao Tome and Príncipe (STP) is located 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 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. A 2007 investment code, updated in 2016, and a 2016 investment benefit incentive law provide 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 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 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 190,300 and its 2015 gross domestic product (GDP) at around USD $317.7 million. Due to STP’s very limited revenue sources, foreign donors finance roughly 77 percent of its budget. STP’s main sources of foreign assistance are Angola, Portugal, the World Bank, the African Development Bank, and the International Fund for Agricultural Development. 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 protracted low oil prices have dampened interest in new exploration projects. 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 and to improve its airport. Its December 2016 decision to cut ties with Taiwan in favor of China is expected to bring major infrastructure development. 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 2014 led to a peaceful transition of power to a new government led by the Independent Democratic Action party. Prime Minister Patrice Trovoada, who took office in November 2014, is focused on economic growth and attracting foreign investment. In July 2016, STP peacefully elected a new president, Evaristo Carvalho. A member of the same party as the Prime Minister, President Carvalho supports increased foreign investment and welcomes closer U.S. engagement on economic matters.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2016 62 of 175 http://www.transparency.org/
World Bank’s Doing Business Report “Ease of Doing Business” 2016 162 of 190 doingbusiness.org/rankings
Global Innovation Index 2016 N/A https://www.globalinnovationindex.org/
U.S. FDI in Partner Country ($M USD, stock positions) 2015 N/A http://www.bea.gov/
World Bank GNI Per Capita 2015 USD $1,669 http://data.worldbank.org/

Policies Towards Foreign Direct Investment

STP is one of the poorest countries in the world with an unclear path to sustained future economic growth. Its economic prospects likely depend on the government’s ability to attract sustained FDI. The government is anxious to improve the country’s investment climate to make it a more attractive destination for foreign investors. There are no laws discriminating against foreign investors. STP’s Trade and Investment Promotion Agency is fully operational and is housed under the Ministry of Finance, Commerce and Blue Economy.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreigners are free to establish and own business enterprises and engage in all forms of business activity in STP, with the exception of the military sector. STP is gradually moving towards open competition in all sectors of the economy, and competitive equality is the official standard applied to private enterprises in competition with public enterprises with respect to access to markets, credit, and other business operations. The government has eliminated former public monopolies in farming, banking, insurance, airline services, telecommunications, and trade (export and import).

There are no limits on foreign ownership or control except for activities customarily reserved for the state (military and paramilitary activities and the operation of the Central Bank). The form of public participation (percentage of government ownership in joint ventures) varies with each agreement. STP does not maintain an investment screening or approval mechanisms for inbound foreign investment.

Other Investment Policy Reviews

The government has not conducted any investment policy reviews through the Organization for Economic Cooperation and Development (OECD). Neither the World Trade Organization (WTO) nor United National Conference on Trade and Development (UNCTAD) has conducted a review. STP is not currently a member of WTO but has observer status, and it is a member of UNCTAD.

Business Facilitation

STP has taken steps to facilitate investment and improve the business environment in recent years. The Millennium Challenge Corporation (MCC) worked with STP from 2007 to 2010 on a Threshold Country Program to improve investment opportunities, including creating a “one-stop shop” to help encourage new investments by making it easier and cheaper to import and export goods, reducing the time required to start a new business, and improving STP’s tax and customs clearance administration.

The Single Window website  (in Portuguese language only) provides information on creating and registering companies in STP.

Outward Investment

While STP’s government does not actively promote outward investment, it does not restrict domestic investors from investing abroad.

STP signed a bilateral investment treaty (BIT) with Portugal but it is not in force. STP has not signed either a BIT or bilateral taxation treaty with the United States.

Transparency of the Regulatory System

The laws and regulations that affect direct investment, including environmental rules, health and safety regulations, apply equally to foreign and domestic firms. STP tax laws reward citizens who return to their home country to invest, while also containing provisions for attracting foreigners to live and work in STP.

The STP legal code is based on Portuguese law. Rule-making and regulatory authority exists at the national level and regulations are developed at the ministerial level. The ministry concerned is responsible for any regulatory enforcement mechanisms. There are no informal regulatory processes managed by nongovernmental organizations or private sector associations.

Draft bills or regulations are not made available for public comment. There is no centralized online location where key regulatory actions are published similar to the Federal Register in the United States.

International Regulatory Considerations

STP is a member of Economic Community of Central African States (ECCAS). ECCAS’ fundamental goal is to promote exchange and collaboration among the members and give an institutional and legal framework to their cooperation. ECCAS is the largest economic community in Central Africa, combining the Member States of the Central African Economic and Monetary Community (CEMAC) (Gabon, Cameroon, the Central African Republic, Chad, Congo Brazzaville and Equatorial Guinea), as well as Burundi, the Democratic Republic of Congo, Angola and Sao Tome and Principe. Covering an area of 6,630,539 square kilometers, ECCAS has a total population of approximately 121 million. As a member, STP benefits from access to a larger market. STP is not a member of the WTO, but has observer status.

Legal System and Judicial Independence

Disputes are generally solved through dialogue or negotiations between parties without litigation, and there are few known instances of disagreements involving foreign investors reaching international courts. The embassy is not aware of any recent disagreements involving foreign investors. The country has a written commercial law but doesn’t have specialized courts.

Overall, the legal system is perceived to act independently. The judicial process is procedurally fair but is subject to manipulation on occasions. All regulations or enforcement actions are appealable to the Supreme Court.

Laws and Regulations on Foreign Direct Investment

The Investment Code of 2007, updated in 2016, provides for both public and mixed capital investments, allowing foreign investment in every sector of economic activity except limited areas reserved to the state (activities related to the military and paramilitary sectors and the operations of the Central Bank).

Beyond the new “one-stop shop” to help encourage new investments, there are no agencies or brokers that provide services to further simplify the procedures for establishing an office in STP. Some companies hire a legal office for assistance. Recent progress due to the MCC program has significantly reduced the cost and waiting period to start a new business. It now takes between three to five days and costs approximately USD $268.00. Although there is no online business registration processes, companies can easily register their businesses. The WB Ease of Doing Business report ranks STP as 35 out of 190 in terms of starting a business.

The following is a general description of how a foreign company can establish a local office:

  1. Provide full company documentation, translated into Portuguese.
  2. Check the uniqueness of the proposed company name and reserve a name.
  3. Notarize the company statutes with the Registration Office at the Ministry of Justice.
  4. File a company declaration with Tax Administration Office at Ministry of Finance, Commerce, and Blue Economy.
  5. Register with the Social Security Office at Ministry of Labor and Social Affairs.
  6. Publish the incorporation notice in the official government gazette (Diario da Republica).
  7. Publish the incorporation notice in a national newspaper.
  8. Register the company with Commercial Registry Office at Ministry of Finance, Commerce, and Blue Economy.
  9. Apply for a commercial operations permit (also known as an “alvara”).
  10. Apply for a taxpayer identification number with the Office of Tax Administration at Ministry of Finance, Commerce, and Blue Economy.
  11. Register employees with the Social Security Office.
  12. Other required documents include: 1) copies of the by-laws of the parent company and of the minutes of the meeting of the board of directors in which the opening of the STP branch is approved; 2) a certificate of appointment of the general manager for STP office; 3) a copy of any agreement signed with a Sao Tomean company or with the STP government; 4) two copies of permits from Court authorization to operate; and 5) two photographs and a copy of the passport of the General Manager.

In addition, the Single Window website  (Portuguese language only) provides information on creating and registering companies in STP.

Competition and Anti-Trust Laws

STP does not have a specific agency that reviews transactions for competition-related concerns. There are no competition laws that limit foreign investment.

Expropriation and Compensation

The government maintains strong protections over all types of ownership of private property. The law permits expropriation of property only if deemed to be in the national public interest and only with adequate compensation. There is no evidence to suggest that the government would undertake expropriation in a discriminatory manner or in violation of established principles of international law and standards.

Aside from a massive land expropriation from colonial farmers in 1976 – later recognized by the government as detrimental to STP’s economy – there have not been any documented cases of expropriation of foreign-owned properties. The government has reportedly considered expropriating land to expand the runway at the international airport, but thus far has been reluctant to do so out of concern that any expropriation will be a deterrent to new investment.

Dispute Settlement

ICSID Convention and New York Convention

STP is a member of the International Centre for the Settlement of Investment Disputes (ICSID Convention) and the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).

Investor-State Dispute Settlement

STP does not have a Bilateral Investment Treaty with the United States. There are no reports of investment disputes that have involved a U.S. person or other foreign investors in the past 10 years. STP courts recognize and enforce foreign arbitral awards issued against the government. There are no reports or history of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

The STP legal system recognizes international arbitration, and local courts recognize foreign arbitral awards, however enforcement may be difficult.

Bankruptcy Regulations

STP has a bankruptcy law but it is not well developed. In the World Bank’s 2017 Doing Business Report, STP ranks 158th out of 190 economies on the ease of resolving insolvency.

Investment Incentives

In accordance with the 2007 Investment Code, updated in 2016, investments above USD $250,000 are eligible for benefits and guarantees, including fiscal incentives. Examples of such incentives include the use of state-owned land for the duration of investment projects, and the provision of administrative services to facilitate the process of obtaining access to state-owned land. In addition, the 2016 investment and benefits law provides for new tax exemptions, tax credits, special benefits, exceptional and complementary benefits and incentives.

Foreign Trade Zones/Free Ports/Trade Facilitation

STP currently has no free trade zones or free ports. The Free Zone Authority (AZF) was established to create a free trade zone in STP but was shuttered in late 2011 due to lack of interest. There are currently no efforts underway to reengage the AZF.

Performance and Data Localization Requirements

STP’s government encourages but does not mandate local employment. STP has no specific performance requirements as a condition for establishing, maintaining, or expanding investment. There are no requirements for investors to buy local products, to export a certain percentage of output, or to invest in a specific geographical area. There is no blanket requirement that nationals own shares in foreign investments in STP. The visa application process is straightforward and transparent and visas or work permits are usually easy to obtain if companies meet all the requirements. Nevertheless, Sao Tomean Embassies and Consulates worldwide at which such applications can be processed are scarce. STP recently began accepting online visa applications, but the new system does not work smoothly. In 2015, STP lifted visa requirements for U.S. and EU citizens for stays of up to 15 days. Information regarding procedures to submit an online visa application is available here .

There is no known forced localization requirement and no known requirement for foreign IT providers to turn over source code.

Real Property

STP guarantees private property rights, and authorities must provide fair, adequate, and effective payment at market value in advance before expropriating property. The government owns the vast majority of land in STP, with less than 10 percent held by private owners. Foreigners cannot purchase land, but can purchase structures and typically the government gives a concession of the land. U.S. companies have not raised property rights concerns with the Embassy.

Intellectual Property Rights

U.S. companies have not raised intellectual property rights concerns with the Embassy. During the past year no new IP related laws or regulations have been enacted. STP does not report on seizures of counterfeit goods. STP is not listed in USTR’s Special 301 report and is not listed in the notorious market report.

STP is a member of the World Intellectual Property Organization (WIPO). The Regulation on Industrial Property (Decree No. 6/2004) covers enforcement of IP, including geographical indications, patents, and trademarks.

Capital Markets and Portfolio Investment

The STP government is anxious to attract foreign portfolio investment but struggles to attract investors because there are few attractive investment opportunities. While the regulatory system in principle is conducive to foreign portfolio investment, there are currently no known significant U.S. investors active in STP and there is little understanding of the functionality of STP’s capital markets.

Money and Banking System

STP has five private commercial banks. Portuguese, Angolan, Nigerian, Cameroonian, Gabonese and Togolese interests (as well as those of STP) are represented in the ownership and management of the commercial banks. The Gabonese Investment Bank BGFI opened its Sao Tomean operation in March 2012. Banking services are available in the capital and a few smaller cities in north, south, and central of the country.

In addition to retail banking, commercial banks offer most corporate banking services, or can procure them from overseas. Local credit to the private sector is limited and expensive, but available to both foreign and local investors on equal terms. The country’s main economic actors finance themselves outside STP. Commercial banks have transferred excess liquidity to correspondent banks outside the region.

STP has a central bank, the Central Bank of STP (CBSTP). Foreigners must establish residency to open a bank account.

Foreign Exchange and Remittances

Foreign Exchange

The Central Bank of STP (CBSTP) supervises the national financial system and defines monetary and exchange rate policies in the country. Among other responsibilities, the CBSTP sells hard currency and establishes indicative interest rates. There is no difficulty in obtaining foreign exchange.

The dobra (denoted by the acronym “STD”) is the country’s national currency. In July 2009, STP and Portugal signed an economic cooperation agreement with the objective of fixing the STD to the Euro rather than a weighted basket of currencies. As a result, since 2010, the STD has been pegged to the Euro at an exchange rate of 1 Euro equal to STD 24,500.00. This anchorage offers credible parity, minimizes the monetary instability costs, and provides better credibility for the exchange rate and monetary policy. As of April 2017 one U.S. dollar was equivalent to about STD 23,000.

Remittance Policies

Repatriation of capital is possible with prior authorization. Transfer of profits outside of STP is also allowed after the deductions for legal and statutory reserves and the payment of existing taxes owed. The government encourages reinvestments with associated reductions in income taxes.

Sovereign Wealth Funds

STP does not have a traditional sovereign wealth fund. It does have a small National Oil Account (NOA). The NOA was previously funded by signing bonuses paid by energy and oil companies to gain rights to conduct exploration and production activities. According to officials from STP’s Budget Department, every year the government is allowed by law to withdraw up to 20 percent of the balance of the NOA as calculated on June 30 of the previous year. Budget details are not available to the public.

When STP’s cocoa plantations were shut down in the late 1980s, most State-Owned Enterprises (SOEs) also closed. SOEs remain in only five companies: BISTP (International Bank of STP), EMAE (Water and Power Supply Company), ENAPORT (Port Authority Company), ENASA (National Company for Airports and Air Safety), and CST (Santomean Telecommunication Company). CST is operating under a joint venture with the Portuguese Telecommunication Company (PT). The government holds 49 percent of CST, while PT owns 51 percent of the company. BISTP is owned by the STP government (48 percent), the Portuguese Caixa Geral de Depositos (27 percent), and the African Investment Bank (25 percent). The other three state-owned companies operate under government management but with some financial autonomy. The Ministry of Finance and the Audit Court audits the SOEs on an annual basis. The majority of SOEs operate under government management but largely with financial independence.

Privatization Program

STP does not have an active privatization program, but the government is currently looking at privatizing the remaining SOEs.

There are no rules or legislation pertaining to responsible business conduct in STP. Companies generally act in accordance with labor and taxation laws, but there is limited awareness of expectations of or standards for responsible business conduct.

STP’s positive trajectory on Transparency International’s Corruption Perception Index reflects the reforms the government has undertaken in recent years. In the 2016 report, STP gained 4 points over the previous year and is now ranked 62 out of 176 countries. The government approved a new anti-corruption law in 2012. To reduce corruption by civil servants and to track the flow of money, authorities put in place a new requirement that all payments to government entities over USD 5 be made directly at the Central Bank and all salary payments to civil servants be paid directly to the employees’ accounts at commercial banks. A widely praised oil revenue management law was enacted in 2004 to responsibly manage any future oil revenues. STP is an Extractive Industries Transparency Initiative (EITI) candidate country. The government has also taken steps to review and update existing contracts with some foreign companies to better support liberalization and free market competition. The government has denounced corruption and pledged to take necessary steps to prevent and combat it.

Although corruption in customs was historically an issue for foreign investors, an MCC Threshold Program resulted in a modern customs code and related decrees. The MCC program introduced modern customs tracking software and eliminated manual procedures, removing the link between the customs agents and cash payments. As a result, customs revenues have increased significantly while incidents of corruption reportedly have declined. This modernization effort represents a fundamental legislative change from colonial-era customs laws and processes to internationally recognized and transparent best practices and principles.

In 2013, the STP Parliament adopted a fully amended and restated anti-money laundering/counter-terrorist financing (AML/CFT) law which complies with international standards. Of note, the law includes a clear description of the crimes involving money laundering and terrorism financing activities, specifies the persons and entities that authorities can hold criminally responsible, describes the sanctions that authorities can impose and the assets they can confiscate in connection with the criminal activities, and sets forth STP’s regulatory structure. The law designates the Financial Information Unit (Unidade de Informação Financeira) as the central agency in STP with responsibility for investigating suspect transactions. After appearing on previous versions, STP was removed from the Financial Action Task Force’s (FATF) October 18, 2013 list of countries that have strategic deficiencies in their AML/CFT standards and that have not made sufficient progress in addressing the deficiencies. STP is a member of the Inter-Governmental Action Group against Money Laundering in West Africa, a FATF-style regional body.

STP signed and ratified the UN Anticorruption Convention; however it is not party to the Economic Co-operation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

STP does not have a designated agency responsible for combatting corruption.

STP is a vibrant democracy with a history of the peaceful transfer of power. STP is relatively stable, has no ethnic tensions, and has a relaxed lifestyle which locals refer to in local dialect as leve-leve (“take it easy”). Political violence is rare, as a high premium is placed on consensus in decision-making. 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. The July 2016 Presidential election also took place without incident.

STP has a generally good human rights record and demonstrates a respect for citizens’ and workers’ rights. Strikes are not the primary means to settle labor disputes and labor strikes have been sporadic in recent times.

Since independence in 1975, there have been no incidents of politically motivated attacks on projects or installations. There is no anti-American sentiment and instances of civil disorder are rare. There is a maritime piracy and terrorism threat in the Gulf of Guinea, but the impact on STP and its territorial waters has been limited. STP has sought to be an active partner in regional maritime security efforts, although its capacity and resources are minimal due to budget constraints. Violent crime is low and down.

A significant portion of STP’s workforce is young, relatively well-educated, and multilingual (Portuguese and French). Further training of the workforce is needed, however, for the economy to continue to develop. The cost for basic unskilled labor is approximately USD 70 per month, and it is increasing over time. Minimum wage, workday, overtime, paid annual vacations, and holidays are established by STP labor laws. Women are entitled to state-funded maternity leave for a period of 30 days before and 30 days after childbirth. The law recognizes the right of workers to form and join independent unions, conduct legal strikes, and bargain collectively. While the law provides for the right to strike, including by government employees and other essential workers, the law strictly regulates this right. The law does not prohibit anti-union discrimination or retaliation against strikers. Labor laws, including occupational health and safety standards, are poorly enforced due to a lack of resources. Workers’ collective bargaining agreements remain relatively weak due to the government’s role as the principal employer and key interlocutor in labor matters, including wages.

While the Overseas Private Investment Corporation (OPIC) is authorized to do business in STP, there are no currently active programs in the country, nor have there been in the past.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2016 $338 2016 $337.8 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A N/A N/A BEA data available at http://bea.gov/international/direct_investment_
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A N/A N/A BEA data available at http://bea.gov/international/direct_investment_
Total inbound stock of FDI as % host GDP N/A N/A N/A N/A N/A

Table 3: Sources and Destination of FDI

Data not available.
Table 4: Sources of Portfolio Investment

Data not available.

Diana Costa
Political/Economic Officer
U.S. Embassy Libreville
+241 0145 7000

2017 Investment Climate Statements: Sao Tome and Principe
Build a Custom Report

01 / Select a Year

02 / Select Sections

03 / Select Countries You can add more than one country or area.

U.S. Department of State

The Lessons of 1989: Freedom and Our Future