Download SÃO TOMÉ AND PRÍNCIPE

SÃO TOMÉ AND PRÍNCIPE
Economic Freedom Score
25
Least
free 0
World Rank:
136
Regional Rank:
50
75
Most
100 free
53.3
29
Freedom Trend
Tomé and Príncipe’s economic freedom score is 53.3,
SItsãomaking
its economy the 136th freest in the 2015 Index.
score has increased by 4.5 points from last year, reflect-
56
ing impressive improvements in seven of the 10 economic
freedoms related to regulatory efficiency, the management
of public finance, and the rule of law. São Tomé and Príncipe
has recorded the largest score improvement of any country
graded in the 2015 Index, yet it is still ranked 29th out of 46
countries in the Sub-Saharan Africa region, and its score is
below the world average.
This year’s gains in economic freedom have erased losses
recorded in 2013. An improvement of 3.8 points since 2011 has
been led by a gain of over 30 points in business freedom, moving São Tomé and Príncipe out of the “repressed” category.
Despite these improvements, however, economic freedom is
not firmly established. Rampant corruption is exacerbated by
oil exploration and development aid. The government dominates the domestic economy, and the bureaucracy hinders
business formation and labor market efficiency. Efforts to
attract capital for oil exploration have not translated into a
well-crafted investment regime, hindering chances for development of a competitive financial system.
BACKGROUND: Manual Pinto da Costa, who served as president for 15 years following independence from Portugal in
1975, returned to office in 2011.Under São Tomé and Príncipe’s democratic constitution, the president shares power
with a prime minister who requires the confidence of the
parliament to retain power. In 2012, Prime Minister Patrice
Trovoada won legislative elections, but he received a vote of
no confidence and was replaced by current Prime Minister
Gabriel Costa. São Tomé’s economy, one of Africa’s smallest,
is agriculture-based and highly vulnerable to external shocks.
São Tomé remains dependent on foreign assistance. Oil production is expected to begin in late 2015, but both São Tomé
and Nigeria claim unexploited offshore oil fields.
How Do We Measure Economic Freedom?
See page 475 for an explanation of the methodology
or visit the Index Web site at heritage.org/index.
54
52
50
48
46
2011
2012
2013
2014
2015
Country Comparisons
53.3
Country
World
Average
60.4
Regional
Average
54.9
Free
Economies
84.6
0
20
40
60
80
100
Quick Facts
Population: 0.2 million
GDP (PPP): $0.4 billion
4.0% growth in 2013
5-year compound annual growth 4.3%
$2,194 per capita
Unemployment: n/a
Inflation (CPI): 8.1%
FDI Inflow: $30.0 million
Public Debt: 85.3% of GDP
2013 data unless otherwise noted.
Data compiled as of September 2014.
379
SÃO TOMÉ AND PRÍNCIPE (continued)
THE TEN ECONOMIC FREEDOMS
Score
RULE OF
LAW
Country
World Average
Property Rights 25.0
Freedom from Corruption 42.0
0
20
40
60
80
Rank
1–Year
Change
124th
72nd
+5.0
+9.5
100
Although the government has undertaken numerous reforms (e.g., an August 2013 anti–money
laundering law), development aid and offshore oil exploration have fueled corruption among
the ruling elite. Bribery, embezzlement, and mismanagement of public funds are regarded as
endemic. The judiciary is independent but weak, underfunded, understaffed, inefficient, and
susceptible to political influence. Property rights are not protected effectively.
Fiscal Freedom 87.8
GOVERNMENT
Government Spending 41.4
SIZE
33rd
149th
0
20
40
60
80
+0.9
+13.5
100
The top individual income tax rate is 13 percent, and the top corporate tax rate is 25 percent.
Other taxes include a sales tax and a dividend tax. Overall tax revenues equal approximately
14 percent of gross domestic product. Government spending equals 44.2 percent of domestic
production, and public debt is equivalent to 85 percent of the economy.
REGULATORY
EFFICIENCY
Business Freedom 65.1
Labor Freedom 45.8
Monetary Freedom 70.7
93rd
152nd
143rd
0
20
40
60
80
+12.5
+1.1
+2.4
100
The time needed to start a company has been reduced to four days, and licensing requirements
have been simplified. In the absence of a well-functioning labor market, informal labor activity
remains significant. The government stated its intention to cut fuel and power subsidies and
fix problems in the state-owned water and electricity firms in 2014 but took no action.
OPEN
MARKETS
Trade Freedom 75.2
Investment Freedom 50.0
Financial Freedom 30.0
103rd
109th
131st
0
20
40
60
80
–0.1
0
0
100
The average tariff rate for São Tomé and Principe, a member of the Economic Community
of Central African States, was 7.4 percent as of 2008. Pork imports are not allowed. Foreign
investment generally receives national treatment. The underdeveloped financial sector, consisting of eight firms, does not provide adequate access to banking services for a large portion
of the population.
Long-Term Score Change (since 2009)
RULE OF LAW
Property Rights
Freedom from
Corruption
380
–5.0
+15.0
GOVERNMENT
SIZE
Fiscal Freedom
Government
Spending
+12.8
+19.4
REGULATORY
EFFICIENCY
OPEN MARKETS
Business Freedom +20.0
Labor Freedom
–2.2
Monetary Freedom +9.3
Trade Freedom
+15.2
Investment Freedom +10.0
Financial Freedom
0
2015 Index of Economic Freedom