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THE ROLE OF
SMALL AND MEDIUM ENTERPRISES IN BOOSTING FOREIGN INVESTMENT
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The growth
of Foreign Direct Investment (FDI) in the Least Developed Countries including
African countries has been extremely rapid in recent decades, mostly in
countries which have a bigger market size and natural resources. Lagos is
undoubtedly the commercial centre of Nigeria with many companies now moving
their bases to Lagos particularly to Eti Osa Local Government Area because of
the availability of Land and a very conducive environment. However, Micro,
Small and Medium Enterprises have a central place in the economic development
of any nation. Micro, Small and Medium Enterprises perform an important
function in the development of an economy and this cannot be over emphasized.
Micro, Small and Medium Enterprises serve as training arena for local skills
and entrepreneurs, and could become channels for mobilizing local savings,
ensuring a more equitable distribution of income and reducing the migration of
manpower from the rural to urban areas. The reduction of rural-urban migration
is desirable and where the MSMEs are given the required support, this will lead
to development of the rural areas in the long-run.
According to
(Cook & Nixson 2000), interest in the role of small and medium-scale
enterprises (SMEs) in the development process continues to be in the forefront
of policy debates in developing countries. In view of the relevance of SME’s,
in 2006 the government of Taiwan launched a $61 million branding initiative,
which aimed to propel the economy from being production-based to
knowledge-based (Lin 1998; Onuorah 2009; SAN 2006). According to the report in
English language version of the online edition of Electronic Engineering
Times-Asia print magazine, formerly Asian Sources Electronics Engineer (EE
Times Asia) in August 2006, the so-called "Branding Taiwan Plan" is a
seven-year program designed to help promising small-to-medium enterprises
(SMEs) in developing their own brand, according to the Taiwanese government.
This was started with the view of SMEs capacity to advance the economy most
importantly in the medium term. Small businesses employ 72,000,000 people
(Schaper 2002). More than 90 per cent of the industries in Indonesia,
Philippines, Thailand, Hong Kong, Japan, Korea, India and Sri Lanka are small
enterprises (Cook & Nixson 2000).
Small and Medium Enterprises plays
a vital role in shaping economic and social performance and prospects of
countries around the world, especially those of developing countries. No
country has grown without trade. However, the contribution of trade to
development depends a great deal on the context in which it works and the
objectives it serves. Also, many other developing countries, particularly the
less developed countries, have embarked on unilateral trade liberalization in
recent years, with very limited results at best in terms of increased growth
and development.
The World Bank of recent have been
emphasizing on the importance of SME participation in International trade.
SME's needs to be engaged actively as direct recipients of international trade
projects. Therefore, UK businesses remain well placed to succeed in Nigeria
because of its familiar legal system, strong ties through the diaspora
community, and the perception that UK brands offer high quality. This study
aimed to examine the role of Small and Medium Enterprises in boosting foreign
investment in Eti Osa Local Government Area of Lagos state, Nigeria.
1.2 Statement of the Problem
Small and
Medium Scale Enterprises (SMEs) have play important roles in the development
process in most of the developed economies, and prove to be one of the most
viable sectors with economic growth potentials. The successes recorded by
countries generally in this sector arise as a result of the high priority
considerations and future rewards from sustained investment in this sector. The
extent to which the opportunities offered by SMEs are exploited and their
contributions maximized in any economy depend on the enabling environment
created through the provision of requisite infrastructural facilities. These
include roads, telecommunications, Power, Ports, etc and the introduction and
pursuit of policies such as concessionary financing that encourage and
strengthen the growth of SMEs.
However, In
Nigeria, the SMEs sector has not been able to perform the expected vital and
vibrant role in attracting foreign investors to the country. This is because
the SMEs are confronted with several drawbacks and challenges they have to
overcome in order to operate successfully. These obstacles include for example
access to finance, competition, access to market, appropriate technology and
lack of adequate infrastructural facility. These challenges have hindered SMEs
from employing as much as they should, the SMEs are unable to generate wealth
as they should and their contribution to poverty reduction is also hindered.
1.3 Research Questions
The
following are some of the questions which this study intends to answer:
i) what are the contributions
of SMEs to foreign investment in foreign investment in Eti Osa Local Government
Area of Lagos state?
ii) what are the things that
attract foreign investors to have their base at foreign investment in Eti Osa
Local Government Area of Lagos state?
iii) what are the problems facing
SMEs in attracting foreign investors to Nigeria?
1.4 Objectives of the Study
The broad
objective of this study was to examine examine the role of Small and Medium
Enterprises in boosting foreign investment in Eti Osa Local Government Area of
Lagos state, Nigeria. The specific objective included:
i) to inquire the contributions
of SMEs to foreign investment in foreign investment in Eti Osa Local Government
Area of Lagos state
ii) to identify the things that
attract foreign investors to have their base at foreign investment in Eti Osa
Local Government Area of Lagos state
iv) to understand the problems
facing SMEs in attracting foreign investors to Nigeria?
1.5 Research Hypothesis
The research
hypotheses to be tested include:
i) there is no significant
relationship between SMEs and foreign investment
ii) there is no significant
correlation between foreign investment and development of Eti Osa Local
Government Area of Lagos state
iii) there is no significant
relationship between SMEs and foreign investment boosting in Eti Osa Local
Government Area of Lagos state
1.6 Significance of the Study
This Study
is significant because the SMEs sector occupies a vital place in the economic
development of the country. If the SMEs sector is well developed, and is
effective and efficient, it creates employment opportunities, decreases the
level of poverty and reduces inequality among the citizens of the society and
also attracts foreign investors and thereby brings about quick and rapid
development of our economy. Also, This study will benefit the government as it
will help to bring out whether or not SMEs has been able to effectively carry
out its functions or not, and if not the reason (s) will be brought to light
and this will help the policy makers to see how to address the problems
identified.
1.7 Scope of the Study
The study
examined the role of Small and Medium Enterprises in boosting foreign
investment in Eti Osa Local Government Area of Lagos state, Nigeria and it
therefore, covered SMEs in Eti Osa Local Government Area of Lagos.
1.8 Limitation of the study
Time
constraint was the major challenge of this study. The researcher was
simultaneously engaged in this study with other academic work. This
consequently cut down on the time devoted for the research work.
1.9 Definitions of Terms
The
following terms were used in the course of this study:
Foreign
investment: involves capital flows from
one country to another, granting extensive ownership stakes in domestic
companies and assets.
Foreign
investors: Persons that own business in another country other than their
country
SMEs: Small
and Medium Scale Enterprises
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