The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies around the world. They analyze a variety of economies that are or could be markets for U.S. businesses. The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption. The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption. To access the ICB, visit the U.S. Department of State Investment Climate Statements website at https://www.state.gov/reports/2022-investment-climate-statements/sao-tome-and-principe/
2022 Executive Summary
São Tomé and Príncipe (STP) is a stable, multi-party democracy. It is a developing country with a Gross Domestic Product (GDP) of roughly USD $427.4 million and a population of 215,048 (World Bank, 2019 estimate). Due to STP’s very limited revenue sources, foreign donors finance roughly 90 percent or more of its public investment budget. For the 2021 budget, these donors were China, Japan, Portugal, the World Bank, European Union, the UN Food and Agriculture Organization (FAO), the African Development Bank, and the Arab Bank for Economic Development (BADEA.)
STP has taken positive steps over the last decade to improve its investment climate and to make the country a more attractive destination for foreign direct investment (FDI), including by working to combat corruption and create an open and transparent business environment. In 2021, VISA cards were introduced in the country. To improve the appeal of tourism during the pandemic, the Tourism Directorate launched its “Seal of Clean” Program in 2021. The Value Added Tax (VAT) Law (13/2019) enacted in 2019 to facilitate tax collection and enforcement of the tax code is scheduled for adoption. A modern Labor Code (6/2019) came into force in 2019 to make it easier for investors to understand and abide by the labor standards. In June 2019, STP also became the 25th African country to ratify the African Continental Free Trade Agreement (AfCFTA). In 2018, it passed its Public-Private Partnership (PPP) Law, Notary Code, and Commercial Register Code. The Regulation of Investment Code was adopted in 2017 and the Investment Code and Code of Fiscal Benefits and Incentives were previously adopted in 2016. The 2013 anti-money laundering and counter-terrorist financing law brought STP into compliance with international standards. A Millennium Challenge Corporation Country Threshold Program, completed in 2011, modernized STP’s customs administration, reformed its tax policies, and made it less burdensome to start a new business. Together, these efforts helped to develop a modern and transparent legal framework for foreign investment. Due to its reliance on outside investment, STP remains committed to improving its investment climate.
The government continues to work with the business community to develop the country economically and to improve basic social services for the country’s young and growing population. In 2018, it approved a four-year program to promote “robust economic growth” focused on the provision of services, including tourism, the financial sector, technology, logistics, and health services associated with the digital economy. Special attention is also being given to traditional sectors, mainly agriculture, livestock, and marine resources. STP’s extensive maritime domain (160,000 km2) may hold opportunities for hydrocarbon production as technology improves. In cooperation with China, STP is seeking to modernize its port infrastructure and capitalize on its fishing potential. In 2020, China also announced funding for airport rehabilitation and upgrades. STP is using Word Bank funding to rehabilitate the road linking the capital to the north of the island. However, foreign investors continue to face challenges identifying viable investment opportunities due to STP’s small and fragile domestic market, inadequate infrastructure, slow moving justice system, high cost of credit, and limited access and expensive electricity.
Prime Minister Jorge Bom Jesus is focused on fighting corruption, improving the business environment, attracting Foreign Direct Investment (FDI), and promoting economic growth. In his inaugural address in 2021, President Carlos Vila Nova expressed support for protecting the environment and promoting investments. He also welcomed U.S. cooperation.