CHAPTER ONE
INTRODUCTION
1.1 Background of the study
The internalization of an economy that was once characterized by its
foreign trade flows (imports and exports) and by the movement of people,
nowadays results in an intensification of Federal Direct Investment
(FDI) movements. Globalization and neo-liberal policies, including
liberalization and privatization, have generated a significant growth of
FDI in recent years (Colantonio, 2005; Mohamed & Sidiropoulos,
2010). Despite the increase of globalization in the Tourism industry,
there is surprisingly little empirical research on the impact of FDI.
Many studies about FDI exist, but only a few analyze the Tourism sector
and its implications. According to (Dwyer & Forsyth, 1994), even
though FDI plays an important role in the development of world Tourism,
the analysis of its impacts has been neglected and has attracted less
attention in the literature than what was expected. More and more
countries worldwide try to attract FDI to promote their growth. FDI is a
means to finance new structures and equipment and allow a transfer of
more advanced technology and forms of management, in addition to the
multiplier effects it provides. It is crucial for countries to
understand what drives companies to invest aboard, given that FDI
contributes to their economic growth and development. The aim of this
study is to identify the factors considered to be determinant in the
process of attracting FDI to the Tourism sector, from a comprehensive
review of literature. Accordingly, the paper begins with a brief summary
of international trade theories and their connection with FDI; followed
by a theoretical framework of FDI identifying the positive and negative
impacts and the determinant factors in the attraction process. In the
second part of the paper, the connection between FDI and the Tourism
sector is analyzed, concluding that the factors considered determinant
in FDI attraction are similar to Tourism and other sectors, but varying
in their importance. Lastly, some strategies are suggested to attract
FDI.
1.2 Statement of the problem
The financial system in our country is relatively underdeveloped by
western standards, even though progress has been made. Despite some
recent improvement, Nigeria’s business freedom remains constrained by a
burdensome regulatory environment. Corruption in Nigeria remains in high
levels. Corruption is evident in all the sectors and levels of
government. Nigeria is still considered a transit country for the
traffic of arms, contraband and human beings. The economy remains
vulnerable on several fronts due to tax evasion and the lack of
anti-money laundering laws. The resolution of the property problem in
Nigeria is obstructing foreign investors. The process of the
denationalization of land and national buildings, medium and large-sized
national enterprises in industrial sectors with intensive capital, and
strategic sectors like energy, water and transport, has been slow.
1.3 Objective of the study
To determine the impact of foreign direct investment on the hospitality sector
1.4 Research question
Does foreign direct investment have any significant impact on the hospitality sector of the economy?
1.5 Research hypothesis
Ho: Foreign Direct Investment has no significant impact on the
hospitality sector of the economy. Hi: Foreign Direct Investment has
significant impact on the hospitality sector of the economy.
1.6 Significance of the study Foreign Direct Investment (FDI) has
become an increasingly important element for economic development.
Specifically in the Tourism Industry, it is paramount to know which
factors affect FDI inflows. The aim of this study is to analyze the main
potential determinants in the process of attraction FDI in to the
Tourism Sector. This article offers a comprehensive review of articles
that were published, and concludes that the key determinants of FDI in
the Tourism Sector are similar to the determinants of FDI in other
sectors. The information obtained is a starting point for the
implementation of strategies to attract foreign investment
1.7 Scope / Limitations of the study
This study on the impact of foreign direct investment on the
hospitality sector will cover various approaches to the study and its
impact on the area of study. Financial constraint– Insufficient fund
tends to impede the efficiency of the researcher in sourcing for the
relevant materials, literature or information and in the process of data
collection (internet, questionnaire and interview). Time constraint–
The researcher will simultaneously engage in this study with other
academic work. This consequently will cut down on the time devoted for
the research work.
1.8 Definition of Terms Foreign Direct Investment: Is a controlling
ownership in a business enterprise in one country by an entity based in
another country. Hospitality: The friendly and generous reception and
entertainment of guests, visitors, or strangers.