Country Economic Memorandum

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    Country Economic Memorandum for Sao Tome and Principe - Background Note 6: Stock Take on Business Environment Reform in São Tomé and Príncipe
    (World Bank, Washington, DC, 2019-06-26) Uriz, Zenaida
    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. 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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    Country Economic Memorandum for Sao Tome and Principe - Background Note 10: What are the Obstacles to Agricultural Development in STP? A Review of Current Agriculture Production Structure and Potential
    (World Bank, Washington, DC, 2019-06-26) Arias, Diego ; Horton, John ; Valdivia, Pablo
    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. 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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    Country Economic Memorandum for Sao Tome and Principe - Background Note 3: Where has Trade Growth Come from in São Tomé and Príncipe
    (World Bank, Washington, DC, 2019-06-26) Signoret, Jose E.
    This note examines the competitiveness of the export sector in São Tomé and Príncipe. It relies on the framework developed by Reis and Farole (2012) and examines the export competitiveness along four complementary dimensions: export growth and market shares, diversification in terms of product and destinations, quality of exports, and the survival or persistence of export flows. It uses export product level data for the period 2000-2017, as available, from international trade databases that help in benchmarking the performance of São Tomé and Príncipe with that of peer countries. Peer countries include, as data is available, Belize, Cabo Verde, Comoros, Dominica, Fiji, Mauritius, Maldives, Seychelles, St. Lucia and Vanuatu. While this note focuses on export outcomes, it also provides a brief picture on imports into São Tomé and Príncipe. The main findings of this note are as follows: Trade remains important for São Tomé and Príncipe, especially imports to satisfy local demand. Total exports have been increasing, both for goods and services. Goods exports, however, remain highly concentrated in cocoa exports to the EU market. Export trends for goods have tended to sustain this dependence, with very little expansion in the extensive margin, and thus with limited diversification of goods exports. This is despite relative comparative advantages in other agricultural products, such as coconuts, dried fruits, and seafood and preferential duty-free and quota-free access into the EU and other developed countries’ markets. Meanwhile, exports of services have increased rapidly, led by travel services. São Tomé and Príncipe exports more services than goods and it has become a net exporter of services. Creating strong (backward) linkages between the tourist industry and the rest of the economy could sustain growth in other industries that, in turn, can support export diversification.