INVESTIGATING ON THE IMPACT OF INFRASTRUCTURE DEVELOPMENT ON BUSINESS COMPETITIVENESS IN CAMEROON

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The significance of infrastructure in fostering economic growth and development cannot be overstated, as highlighted by the World Bank in 2018. The U.K. Department for International Development (DFID) in 2002 further elaborated on the various channels through which infrastructure positively influences sustainable growth and development. These include reducing transaction costs, facilitating trade, enabling economic adaptability to diverse demands, reducing input costs for businesses, creating employment opportunities, enhancing human capital, and improving environmental conditions. However, these factors are interconnected and contribute to better livelihoods, improved health outcomes, and decreased vulnerability among the impoverished population. 

Furthermore, sufficient infrastructure is a fundamental requirement for fostering economic growth. However, one might intuitively understand that various aspects of infrastructure development interact with economic growth in intricate ways, acting as intermediary goods. According to Calderón ( 2018), enhancements in both the quality and quantity of infrastructure play a significant role in boosting the productivity of business industries as a whole, ultimately elevating the industry profitability and competitiveness. Moreover, traditionally, the responsibility for infrastructure provision has rested with governments due to the inherent characteristics of infrastructure: high construction costs, large-scale projects with indivisibility, considerations of national security, and the existence of natural monopolies. However, relying solely on the public sector (businesses) for infrastructure development often leads to shortcomings in ensuring an adequate supply. These shortcomings typically arise from budget constraints, a lack of stable long-term financing, macroeconomic risks stemming from political instability, and governance issues (Okoh, 2021). As such, for the public sector, maintaining flexibility in delivering a country's infrastructure becomes challenging. During Cameroon's economic upswing, there was notable high growth, with the GDP experiencing an average annual growth rate of 8%. This enabled the country to maintain a substantial per capita income level despite a similarly high population growth rate of 3% (Amin, 2019). Additionally, during the period from 2000 to 2005, advancements in information and communication technologies contributed positively to Cameroon's growth, increasing per capita growth performance by 1.26% points, whereas deficiencies in the power infrastructure hindered growth by 0.28% points. The collective contribution of telecommunications, electricity, and roads to Cameroon’s per capita growth during this period was 1.05% points (AICD, 2018), primarily driven by a rapid accumulation of infrastructure assets rather than improvements in infrastructure quality. Specifically, the information and communication technology (ICT) sector played a significant role, adding 1.26 percentage points to the per capita growth rate, while the power sector had a negative impact, reducing per capita growth by –0.28 percentage points (AICD, 2018).  In addition, following the global economic crisis in 2008, developing countries experienced a significant decrease in foreign investment, leading to substantial reductions in both investment and official development assistance. This financing shortfall exacerbated long-term infrastructure supply challenges, prompting developing country governments to prioritize infrastructure projects that were deemed more effective and could serve as better stepping stones for the future. With limited budgets and funding sources, they began assessing the viability of infrastructure projects and their potential ripple effects. Thus, there was a growing inclination towards accepting private participation to bridge the funding gap and achieve greater project cost efficiency. Therefore, a survey will be conducted to investigate the impact of infrastructure development on business competitiveness in Cameroon.

1.2 Statement of the Problem

 Infrastructure encompasses capital-intensive facilities, some of which may not be of direct public interest, although most are actively utilized by the public. Economists commonly classify such objects as physical infrastructure or infrastructure capital. In scholarly discourse, the role of infrastructure is assessed based on the services rendered by these physical assets. Services provided by infrastructure, such as energy, transportation, telecommunications, water supply, sanitation, and waste management, are indispensable for household activities and economic production across various sectors. Scholars such as Prud'homme (2020) and Baldwin and Dixon (2018) argue that infrastructure constitutes a long-term, spatially bound, capital-intensive asset with an extended lifecycle, and the returns on investment often face challenges associated with market failures. These market failures could stem from situations such as monopolies, where a single seller can exploit their market power to set prices significantly above costs, or natural monopolies, which resemble public goods and generate positive externalities, leading to cost reductions for businesses or significant social benefits (merit goods) through external networks. Thus, it is in the light of these that the study seeks to investigate the impact of infrastructure development on business competitiveness in Cameroon.

1.3  Objectives of the Study

The main purpose of this study is to investigate the impact of infrastructure development on business competitiveness in Cameroon. Specifically, the study will;

 Determine whether there is an adequate provision of infrastructures to promote small businesses in Cameroon,

Ascertain the impact of infrastructure development on performance of small businesses in Cameroon.

Determine the extent adequate provision of infrastructures enhances the competitiveness of small businesses in Cameroon.

1.4 Research Questions

The following questions have been prepared for the study:

 Is there sufficient infrastructure provision to support the promotion of small businesses in Cameroon?

What is the influence of infrastructure development on the performance of small businesses in Cameroon?

To what extent does the adequacy of infrastructure provision enhance the competitiveness of small businesses in Cameroon?

1.5  Research Hypotheses

Ho: There are no significant relationship between infrastructure development and the performance of small businesses in Cameroon.

Ha: There are significant relationship between infrastructure development and the performance of small businesses in Cameroon.

1.6  Significance of the Study 

Subsequent researchers will use it as a literature review. This means that other students who may decide to conduct studies in this area will have the opportunity to use this study as available literature that can be subjected to critical review. Invariably, the result of the study contributes immensely to the body of academic knowledge with regard to the impact of infrastructure development on business competitiveness in Cameroon.

1.7 Scope of the study

The scope of this study is to investigate the impact of infrastructure development on business competitiveness in Cameroon. Empirically, this study will  determine whether there is an adequate provision of infrastructures to promote small businesses in Cameroon, ascertain the impact of infrastructure development on performance of small businesses in Cameroon and determine the extent adequate provision of infrastructures enhances the competitiveness of small businesses in Cameroon.

Geographically, the study will be delimited to residents of Buea, Cameroon.

1.8 Limitation of the study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents. In addition, there was the element of researcher bias. Here, the researcher possessed some biases that may have been reflected in the way the data was collected, the type of people interviewed or sampled, and how the data gathered was interpreted thereafter. The potential for all this to influence the findings and conclusions could not be downplayed. 

More so, the findings of this study are limited to the sample population in the study area, hence they may not be suitable for use in comparison to other schools, local governments, states, and other countries in the world.

 1.9 Definition of Terms

Finance: refers to the management of money and other assets, including investments, lending, borrowing, budgeting, and financial planning. It involves activities related to the allocation and utilization of funds to achieve financial goals.

Entrepreneur: is an individual who starts, organizes, and manages a business venture, assuming the associated risks in pursuit of profits or social objectives.

Strategies: are plans or actions designed to achieve specific objectives or goals within a given context or situation.