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.
|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/