WORLD TRADE
ORGANIZATIONWT/L/389
25 January 2001
(01-0408)
Original:  French
SÃO TOMÉ AND PRINCIPE – REQUEST FOR OBSERVER STATUS
Communication from São Tomé and Principe
The following communication has been received from the Minister of Economy of the
Government of the Republic of São Tomé and Principe.
_______________
On behalf of the Government of the Republic of São Tomé and Principe, I have the honour to
submit herewith a request for observer status in the General Council of the World Trade Organization
(WTO) and its bodies.
The Government of the Democratic Republic of São Tomé and Principe has expressed on
several occasions its wish to accede to the WTO as soon as possible.
Observer status should help us to acquire a better understanding of the Organization's rules
and procedures.
In accordance with the Rules of the General Council, we have the pleasure of sending you
herewith our report on the economic and foreign trade policies of São Tomé and Principe.
We would be grateful if you would submit our request to the General Council at its next
meeting.WT/L/389
Page 2
OVERVIEW OF THE ECONOMIC POLICY AND FOREIGN TRADE
REGIME OF THE DEMOCRATIC REPUBLIC
OF SÃO TOMÉ AND PRINCIPE
Located north of the Equator, approximately 300 kilometres from the coast in the Gulf of
Guinea, the Democratic Republic of São Tomé and Principe is a small, lusophone island country.
The archipelago is made up of two islands of volcanic origin covering a total area of
1,001 km2 – 852 km2 for the island of São Tomé and 142 km2 for the island of Principe – as well as a
number of small islands.  It has a large exclusive economic zone, with marine resources and large oil
deposits.
As the only former Portuguese colony of Central Africa, its official and only language is
Portuguese.  It does not belong to the monetary zone of the African Financial Community (CFA).
São Tomé and Principe has a considerable potential for tourism thanks to its geographical and
ecological characteristics, its natural beauty, its virgin forest, its wild animals, its beaches, and its
pleasant climate.
The islands are located in a high rainfall area (relative humidity:  approximately 80 per cent)
with a great variety of microclimates.
This allows for a great variety of crops which could contribute to an intensive development of
agriculture and livestock farming for local consumption, and the production of drugs for export.
The rainy season lasts nine months, and the dry season three months.  Part of the south of the
island of São Tomé receives rain practically throughout the year, while the north, which is much drier,
is partly covered by savannah.
The heavy rains which feed the rivers are valu able in providing water for human consumption
and hydroelectric power, as well as for irrigating agricultural land with a view to intensifying
production.
The country has a population of approximately 140,000, with a growth rate (approximately
2.5 per cent) exceeding that of its economic growth.  GDP per inhabitant is US$334.
Economy
São Tomé and Principe's major development problems stem above all from the weakness of
its economy, based on one crop, cocoa, and on services.
The country's exports, which are almost exclusively limited to cocoa and have been on the
decline for the past few years, are insufficient to solve its trade balance problems and offset its importneeds, which are considerable:  food, fuel, construction materials and equipment, and agricultural
fertilizers.
Before independence, the country exported approximately 10,000 tonnes per year.  In 1999, it
exported only 2.2 tonnes.  This reflects a gradual decline in cocoa production which has led to aserious balance-of-payments problem.
In the years that followed, revenue from cocoa exports amounted to US$2.3 million, with a
consequent growth in imports, which have reached US$14.8 million;  hence a trade deficit ofWT/L/389
Page 3
US$12.5 million, made worse this year by the weakness of the international market price.  As a result,
São Tomé and Principe has progressively lost its export quota on the international market.
Every year, the country's financial dependence on foreign aid to satisfy the needs of its
population has grown a little more.
Faced with these enormous economic imbalances, the authorities of São Tomé and Principe
launched a reform programme in 1985, with a structural adjustment plan beginning in 1987.
This economic liberalization involved the following reforms:
• Withdrawal of the State from the productive and commercial sectors;
• privatization of agricultural enterprises;
• restructuring of the private sector;
• reform of State enterprises;
• liberalization of trade;
• customs reform and the adoption of a harmonized commodity description and coding
system;
• creation and progressive modernization of a chamber of commerce, of agriculture, of
industry and of services;
• modernization of legislation and adoption of laws relating to the creation of free
zones and to offshore activities.
These were followed by a number of corrective measures at the macroeconomic level.
However, it is only since 1999 that any clear progress can be seen, with the sharp decline in inflation
and stabilization of exchange rates.
The inflation rate was brought down to 11.7 per cent in 1999, with a one-digit rate forecast
for 2000.
Global development strategy
The results expected following the changes in economic policy justify the prevailing
optimism as to the possibility of achieving stable economic growth in the medium term.
In addition to macroeconomic stability, economic growth over the next few years will require
an acceleration of structural reforms aimed at creating a favourable environment for development of
the private sector and enhanced efficiency of the public administration.
Thus, one of the Government's priorities is to pursue an economic policy that will ensure
macroeconomic stability and promotion of private sector development in order to guarantee, for the
people of São Tomé and Principe, free enterprise and creativity and to provide hope for the enhanced
well-being of the poor populations in a context of sustainable economic development.WT/L/389
Page 4
In view of its small size and limited domestic market, São Tomé and Principe will have to
take the following measures:
• Negotiate access to the markets of the developed countries to provide outlets for
products from São Tomé and Principe;
• study the possibility of integrating the country in the subregional market in the
framework of economic and financial cooperation;
• improve infrastructure and transport in order to reduce the costs of the factors of
production;
• boost competitiveness through better training and upgrading of the workforce,
thereby boosting its productivity.
The country's other priorities over the next few years are the adoption of a development
strategy based on diversification and increased production of exportable goods in the primary and
secondary sectors and ensuring the profitability of production in the agricultural and livestock sectors,
fisheries, tourism and new resources.  This includes:
- The creation of a free zone and development of offshore activities;- exploitation of petroleum in territorial waters.In the trade sector, export promotion and import substitution measures are a priority, together
with incentives and the identification of new markets.
Foreign trade regime
In São Tomé and Principe, trade is an activity that is open to all citizens.  The objective is to
develop business activities more efficiently in order to promote the development of the country andthe welfare of its peoples.
Far-reaching reforms were undertaken as of 1987 to ensure the progressive liberalization of
trade.  The measures taken include the abolition of price controls for local and imported goods,
including the trading margins, which were fixed beforehand.
Export revenue comes mainly from the sale of cocoa which depends heavily on the evolution
of world prices.
Custom regimes
The customs regimes are as follows:
1. Storage for consumption:  this provides for importation for direct consumption, for
consumption after temporary storage, for consumption after temporary import, and for
reimportation for consumption after entry in the free zone.
2. Conditional relief procedures:  these are the procedures relating to transit and storage in a
warehouse of imported foreign goods, temporary import and entry into the free zone.WT/L/389
Page 5
3. Export regimes:  exports carried out directly and definitively, i.e. without storage in an export
warehouse or for temporary export.
4. Re-export regimes:  direct re-export of foreign goods and re-export after temporary storage in
stores or supervised warehouses that must be declared.
The entry into force of the new customs schedul e avoids any over-invoi cing of goods and thus
contributes to increasing customs revenue while at the same time encouraging fair competition
between economic operators.
One of the advantages of the customs reform is the abolition of the consumption tax and the
classification of all goods into three categories (with rates of 5 per cent, 10 per cent and 20 per centrespectively).
__________