Economic growth in Sao Tome and Príncipe (STP) has long been driven by an unsustainable reliance on public expenditures, especially grant- and loan-financed public investment.
... See More + STP needs to turn its smallness into uniqueness to unlock its growth potential. To accomplish this transformation, this image must be matched by a more balanced growth in which the private sector plays a larger role and with a more effective government. Tourism, agriculture, and fisheries could drive the country’s transition to a more balanced growth pattern. This Country Economic Memorandum (CEM) highlights six key challenges that STP must overcome as it transitions to a more balanced growth pattern and it offers policy recommendations for addressing each challenge. Accomplishing this rebalancing will require STP to address six key challenges at the macroeconomic, structural, and sectoral level. These include: (i) The twin budget and current-account deficits; (ii) Weak trade connectivity by both air and sea; (iii) Credit constraints caused by a high level of non-performing loans and difficulties enforcing commercial contracts; (iv) Uncertainty surrounding property rights and land tenure; (v) Poor-quality infrastructure, especially in the energy and transportation sector; and (vi) The overexploitation of marine resources.
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The importance of a good regulatory and institutional environment for business creation and growth is well established. Good regulations and a level playing field are particularly important to maximize opportunities for private investment in small island states like São Tomé and Príncipe, which tends to be constrained by the lack of economies of scale and distance to markets.
... See More + Burdensome regulations can hamper the competitiveness of export-oriented sectors, which are essential for São Tomé and Príncipe’s sustainable growth and job creation. Moreover, sectors that depend on natural or cultural assets, such as tourism, require good quality regulations and planning to protect those assets. Improving the regulatory environment is an important factor, together with better skills, connectivity, and infrastructure, to strengthen the competitiveness of São Tomé and Príncipe’s economy. Accurate data on the size and composition of the private sector in Sao Tome and Príncipe is lacking, but existing information shows that it is dominated by microenterprises in commerce and services. The ongoing enterprise survey will provide insights on the characteristics and main challenges of São Tomé and Príncipe’s firms, while an updated business census, which is planned with support from the World Bank, will give a broader view of the private sector. Data from the National Statistics Institute (INE) shows that there are only 14 companies with more than 100 employees, including the utilities and transport sector SOEs, and 80 percent of firms for which data is available have less than five employees. Most firms are concentrated in the commerce, construction, and tourism sectors. While additional analysis will be necessary to identify the factors contributing to the small size and sophistication of SãoTomé and Príncipe’s firms, the regulatory environment may be among them as it affects entry and operating costs, access to finance, and ability to resolve commercial disputes.
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Sao Tomé and Príncipe is surrounded by oil-producing neighbors, but haven’t found commercially viable oil in its territory so far. São Tomé and Príncipe (STP) is surrounded by major oil producing countries including Nigeria, Equatorial Guinea, and Gabon, but there has not been any commercial oil or gas discoveries in the country’s waters yet.
... See More + STP is exploring for oil in two different zones under different jurisdiction: the Joint Development Zone (JDZ) with Nigeria, and the Exclusive Economic Zone (EEZ). There are talks as well for a joint exploration zone with Equatorial Guinea. The purpose of this note is to update the status of oil and gas exploration in STP and provide a probability and timeline for eventual discoveries and commercial production. The answers to these questions are key to the country’s long-term development prospects, as it would alter dramatically STP’s development path.
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Report 139087 JUN 26, 2019
De Martin De Vivies,Patrice Philippe Marie JosephDisclosed
This note presents an analysis of the obstacles and opportunities for STP’s agriculture value chains, assesses the main sector risks, and provides a series of public sector recommendations for increased private sector investment.
... See More + While the country will remain a net importer of food and agricultural products for the foreseeable future, a series of opportunities exist, some to increase import-substitution, others to expand exports. Given STP’s land constraints and climate variability, importing food will continue to occur in the near to medium-term future to satisfy local demand. However, import-substitution opportunities will continue to offer prospects centered on the feedstuff-livestock chain and the horticultural sector, as well as some additional expansion of the palm oil industry. Export opportunities lie primarily in cocoa products as well as in emerging non-traditional agricultural exports, some strategically linked to tourism, especially eco-tourism already embraced by the government and by high end tourist developments established in the past few years. Analysis of the competitiveness of existing and emerging rural supply chains in STP reveals a series of characteristics that allow to overcome the structural diseconomies of scale of a small island state. These characteristics include among others: (i) high value-to-weight products, (ii) agricultural products that can be taken with tourists, (iii) low perishability and products that can be stored, (iv) climate change resilience; and (v) explore the country’s uniqueness. Value chains that possess some of these key characteristics discerned from the analysis offer private sector opportunities, provided the enabling environment allows them to reach their potential.
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This note discusses the current structure of the financial sector in São Tomé and Príncipe (STP) and the main obstacles preventing mobilization and allocation of more resources to private sector investment.
... See More + Since 2012, credit to the private sector in STP has been declining and is currently below peers. In an economy dominated by informality, banks provide credit to a limited number of borrowers, prioritizing large borrowers. A survey completed in 2017 showed that only 18 percent of micro, small and medium-sized enterprises (MSMEs) reported being registered and having a bank account, of which only 3 percent had access to credit. The same survey showed that only 39 percent of individuals, some of them owners of micro-enterprises registered under their personal name, have access to financial services. The note is divided into four sections. The first provides an overview of STP’s financial sector, analyzing and benchmarking its structure, depth, and soundness. The second section analyzes the landscape of access to financial services (focusing on individuals and MSMEs), while the third describes some of the key limitations of the financial infrastructure in STP that create obstacles to financial sector development and access to finance. Finally, the fourth section concludes with policy recommendations that can help increase access to financial services in STP.
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This note explores land governance-related constraints holding back the growth potential of the agriculture and tourism sectors in the Democratic Republic of São Tomé and Príncipe (STP).
... See More + The absence of a proper land information system and a weak land governance framework are identified as the major constraints to rural development and tourism. This note provides insights, identifies the most salient weaknesses, and presents recommendations to address these issues. The first section describes the history of land tenure in the country. The second section focuses on the positive impacts that the establishment of a land information system can have for rural development and the tourism sectors and describes the institutions in charge of land management and related legislation. The fourth section identifies the main inefficiencies in land administration affecting economic growth. The final sections outline the activities currently in execution to address such issues and present policy recommendations.
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The purpose of this note is to give an overview of the fisheries sector in STP, its potential and obstacles, as well some policy recommendations to address these obstacles, ensure sustainable management of these resources and tap into its potential.
... See More + It is organized in four section, besides this introduction. The second section describes the fishing sector in STP, while the third and the fourth outline the obstacles for the development of the artisanal and industrial fisheries respectively. The last section offers policy recommendations. Fisheries play an important role for the economic and social development of the country, however resources are likely over-exploited. Coastal marine resources are showing signs of full or overexploitation around the Sao Tome island. Before looking at increasing production of coastal resources, knowledge on the status of the fish stock would have to be improved through data collection and research to understand the potential of these resources and adequate sustainable management of these resources would have to be ensure through reinforced legal framework, governance and enforcement, as well as the potential development of co-management1 system between the STP authorities and the fishing communities.
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Report 139093 JUN 26, 2019
Serkovic,Mirko Ivo; Million,Julien Marie FrancoisDisclosed
The purpose of this paper is to empirically evaluate the tourism performance of STP with respect to the main determinants that have been found in the literature.
... See More + Tourism is clearly a comparative advantage of STP and already an important economic activity, however, STP is far from the characterization of a tourism-dependent small economy. Tourism represents 10.8 percent of GDP and the ratio between international inbound tourists and population is at 14.5 percent. For a summary of how STP relates to other destinations. This puts STP as the twelfth country in terms of size of direct contribution of the tourism sector to GDP and the eighteenth in terms of the ratio between tourists and population. Using data from different sources, this note analyzes STP’s tourism-related characteristics and uses different empirical tools to evaluate them vis-à-vis its peers. Economic literature shows that tourism demand is affected by price and income but also by a host of other factors such as air connectivity, language, and culture among others. First, there is an extensive research agenda on measuring price and income elasticities of tourism, which is specific for different types of tourism destination. Second, there is a myriad of characteristics that are found to be important to the tourism industry, such as remoteness, language, culture, air connectivity, bilateral trade, etc. More recently, there has been many studies emphasizing the role of digital media and digital presence1 as a key determinant of tourist decisions.
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The purpose of this analysis is to provide a snapshot of exclusion based on SOGI in São Tomé and Príncipe (STP) and the opportunities for SOGI inclusion especially in the tourism sector.
... See More + The main questions for the reader to consider are: Why is the World Bank involved in SOGI? How can STP benefit from SOGI inclusion? What can be done to ensure SOGI inclusion in STP? Finally, the central takeaway from this analysis is that excluding sexual and gender minorities negatively impacts economic development and poverty reduction, whereas including them is beneficial to economic development and poverty reduction. The theoretical argument is that exclusion costs money. Exclusion based on sexual orientation and gender identity often begins as early as the primary school years and continues in the workplace, as well as more broadly in the economy and in society. As a result, sexual and gender minorities face significant stigma that prevents them from realizing their productive potential and limits their ability to contribute to the economy and to society. When anyone is excluded from the labor force based on indelible personal characteristics unrelated to ability, such as sexual orientation or gender identity, both the economy and social cohesion suffer.
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Report 139095 JUN 26, 2019
Cortez,Clifton John; Arzinos, John (Ioannis)Disclosed
