Rare Earth Metals: From America's dominance to Chinese hegemony

The recent discovery of rare earth metals in Japanese deep sea proves that rare earth metals are not that rare as their name signifies.

Today’s modern life is impossible without rare earth metals. Rare earth metals are 17 elements including 15 separately presented lanthanides as well as scandium, and yttrium.

These metals are used in manufacturing batteries, vehicles, LCDs, plasma screens, fiber optics, medical imaging, hybrid vehicles, wind turbines, microphones, speakers and other green technology devices. This group of metals is indispensable for high performance optics and lasers and key to the most powerful magnets and superconductors in the world.

Their various applications have given rise to western powers’ fear of Chinese dominance in high technology. China currently has near monopoly in Rare earth metals supply.

  "The Middle East has oil; we have rare earths ... it is of extremely important strategic significance; we must be sure to handle the rare earth issue properly and make the fullest use of our country's advantage in rare earth resources." Deng Xiaoping, a Chinese politician from the late 1970s to the late 1980s.

China is rapidly reducing export quota of rare earth in order to strategically move Chinese manufacturers up the supply chain so that they may sell valuable finished goods to the world rather than lowly raw material.

This presented America with a challenge in keeping its dominant position in high tech but also its hegemony over developed nation, who are in dying need of the elements.

The significance of the metals can be gauged from the fact that many geopolitical experts consider these metals to be the sole reason of U.S. stay in Afghanistan. United States, according to them, wants to make European powers their ally, against China, by controlling the supply of Afghanistan’s rare earth metals.

In 2010, Pentagon estimated Afghanistan’s mineral deposits to be worth 1 trillion $, once mined. The New York Times reported that White House officials are looking at Afghanistan’s mineral resources as compelling reason to extend their stay in the country.

“We live in a different world than the past, where commodity prices mattered because a monopoly allowed sometimes a single nation or a group of nations to charge an extremely high price for that material, and people are still thinking along those lines,” Michael Silver said. “That’s not the world we live in today, particularly with rare-earth metals, which is kind of what got me involved in the Afghanistan situation.” Michael Silver head White House Initiative and CEO of American Element

Critics on the other hand points to the fact that Afghanistan is a war zone moreover; mining and refining these metals from the mountain is costly. Another factor which goes against America is Afghanistan has no coast of its own and the only cost effective route for the metals is through Pakistan’s pushtun belt.

Using customers' money for your startup

Beijing has the world’s costliest rental housing, according to a survey of 15 global cities, with average prices more than 1.2 times average salaries, says a report by the Global Cities Business Alliance, a UK-based not-for-profit organization. The rise in rent, in developing countries like China, India, and Pakistan, has provided developers an opportunity to make money out of thin air.

What they do is to purchase a piece of land and then announce construction of residential plaza or shopping mall over it. Advance booking is announced for residential and commercial units. The advance money collected is then used for completing the project. Unheard in many developed countries, realty development is one of the most lucrative areas for investors.

The use of customers’ money for growth isn’t limited to realty sector only; entrepreneurs can use this method to grow their startups in other areas as well. Take the example of TutorVista, which successfully leveraged this customers’ money model of financing. It started when Krishnan Ganesh hired three teachers and provided them with VoIP internet connection, PC displaying a digital whiteboard along with webcam. It quickly became a 100$ per month tuition service.

Dell is another example of customer funded business. Michael Dell, founder of Dell, started by selling customized PCs to small businesses. The core percept in his business was to collect cash before having to lay out money on chips and computers to be sold. 

Customer funding provides many benefits to the startups. Usually, startups receive higher valuations if they performed successfully for an extended period of time, without external funding. Additionally, strong cash inflows, from customers, allow entrepreneurs to focus on proving business model rather than wooing investors.

In this model of business funding, balance sheet shows more current liabilities than current assets. In accounting term it is called negative working capital. Ironically positive working capital is assumed to be good as it poses less insolvency risk to the business.

Not every startup can be run using customers’ funding. Capital intensive projects need to rely on traditional way of financing. 

Foreign investment in Pakistan: boon or bane?

In the last couple of days, Pakistan has witnessed an increase in foreign investment. Many local companies were acquired by foreign multinationals. Dawlance, Pakistan’s white goods manufacturer was acquired by Turkish group Arçelik . Furthermore, in the same week a Dutch based dairy cooperative FrieslandCampina acquired stakes in Engro for around $460 million.

This shows that international investors are viewing Pakistan as a growing market. Its huge population provides huge consumer base. The rise in middle class along with young population makes it attractive location for investment.  Many European countries are having population as much as Pakistan has graduates.

But is there any benefit to the nation of these huge investments from multinationals. In a nutshell we would say yes. But on a deep analysis we would say it is hard to say anything precise unless we take into account other factors.

Let us assume that Turkish group would enhance the quality of the products, manufactured by Dawlance, and would make them attractive to export markets. Definitely, in this case it would be good for Pakistan. Multinational companies have huge research and development departments with billions of dollars in budget which helps them in developing new and better products. Small companies like local ones cannot expend that much on research and development. Furthermore, small companies have issues with protecting patent rights. Hence, from this particular angle it is good that foreign companies are making inroads into Pakistani market.

With better quality and increased foreign clients’ satisfaction, country would be able to earn foreign exchange. This would also help Pakistan to move from exporter of low-tech to exporter of high-tech products.

The ability of multinationals to get a better deal from Govt. in matters of tax rebates is another thing to ponder. In countries like Pakistan, Govt. rules are more favorable to foreign big investors rather than local small investors. The exemption of duties and taxes extended to Chinese companies working on CPEC is one such example.

Exemptions in taxes make it more likely for these companies to earn heavy profits and pay high salaries to its employee. This would mean more and high paying jobs for locals as well as better employee retention for the multinational companies.

But there are more cases in which these companies hire foreign people than local ones. This would mean snatching jobs which could be provided by local companies to local people. Moreover, huge portion of profit earned, through getting tax rebates, by these companies is repatriated back to their country of origin.

Thus foreign investment is good for host country if it leads to transfer of technology; increase in exports, provides employment to local ones, pays taxes and duties to host country Govt. and improves quality of manufactured goods.

6 thirsty industries

Water, the most abundant compound on earth, is used by many industries. When you use computers, wear cotton shirts, drink beverages you are actually consuming water. The industries which are most water thirsty are listed below. In terms of direct water usage, agriculture and power-generation industries top the list, which together are responsible for 90 percent of direct water withdrawals.

1.       Agriculture

Agriculture is the major water consumer of all the industries. For India more than 90% fresh water usage is in agriculture industry.

 The room for improvement in water usage efficiency is also in this industry. Using modern techniques like sprinter irrigation, drip irrigation etc can help to make use of water efficiently. In developing countries huge amount of water can be saved by simple improvements in the method of irrigation.

2.       Power generation

Generation of electricity is another bigg consumer of water.  Ultimately, it takes a staggering 95 liters of water to produce one kilowatt-hour of electricity, according to Tamim Younos, research professor of water resources at Virginia Tech.

Pumping oil, cooling the power plant, removing pollutants from power plant exhaust, generating steam to run turbines, and washing away residue after fossil fuels are burned all involve water usage.

All sources of power generation are not equal in water consumption efficiency. For example natural gas is the most efficient source of energy in terms of water consumption.

3.       Food processing

Huge water is used to wash and rinse fruits, vegetables and meat. Food processing industry uses water to

1.       Wash raw food,

2.       washing after steaming/peeling/ size reducing,

3.       Balanching

4.       Filling

5.       Sanitation and plant cleaning

Half of the water used in the fruit and vegetable sector is for washing and rinsing

4.       Textile and garment industry

Textile and garment industry is very water intensive. Most of the water used is in wet processing and dyeing fabrics. The textile industry uses 100 liter of water to process only 1 kg of textile fabrics.

5.       Meat production

According to a study by the UNESCO Institute for Water Education, conducted between 1996 and 2005, “29 percent of the total water footprint of the agricultural sector in the world is related to the production of animal products.”

 It takes more than 1,800 gallons of water to produce 1 pound of beef

6.       Semiconductor manufacturing

Semiconductor Manufacturing Plants can use as much water as a small city. These plants use water in washing the silicon wafers with ultra pure water. One manufacturing plant uses anywhere between 2 to 4 million gallons of very, very pure water— ultrapure water—per day, and that is roughly equivalent to the water usage of a city of around 40,000 people.

Ultrapure water is a term in the semiconductor industry to emphasize the fact that the water is treated to the highest levels of purity for all contaminant types, including: organic and inorganic compounds; dissolved and particulate matter; volatile and non-volatile, reactive and inert; hydrophilic and hydrophobic; and dissolved gases.

Pakistani people in private equity industry.

Private equity represents a class of investors, their funds, and their subsequent investments, which are made in private companies or public companies with the goal of taking them private.

Below are some notable Pakistani people from private equity industry around the globe.

1.      Riaz Siddiqi is a Founder and Managing Partner of Denham Capital, a private equity firm that manages over 4 billion dollars and invests in the commodity and energy sectors globally.

2.      Faysal Sohail is a venture capitalist and has served as a General Partner at CMEA Capital since 2002. 

3.      Wahid Hamid is a Senior Partner at Abraaj Capital and Head of Portfolio Management and Operations Group.

4.      Dr. Moeen Qureshi - Chairman of EMP Global, a multi-billion private equity fund; Former Prime Minister of Pakistan; Former CFO of World Bank

5.      Arif Naqvi is founder Abraaj Capital, a leading private equity firm that invests in Middle East and North Africa.

6.      Aamer A. Sarfraz is founder of Indus Basin Holding, a developer of agribusiness projects in Pakistan.

7.      James Caan is also the founder and currently CEO of the UK-based private equity firm Hamilton Bradshaw

8.      asad zain Founding Member at Manara Equity Partners

9.      Abdul Hafeez Sheikh, General Partner New Silk Route Partners (a private equity firm that invests in Asia and middle east)

10.  Sardar Sherazam Mazari. In May 2009, he established Rojhan Capital as Managing Partner, which is an investment and management company focused on Pakistan.

11. Asad Jamal of ePlanet Capital is global venture pioneer. He has offices in Asia, Europe, U.S. he led investments in many hi-tech firms including Baidu ( China’s google), HiSoft (information technology and business process outsourcing company headquartered in China), median technologies (cancer detection company based in France), SiliconFile Technologies(chips for cell phones and cameras, South Korea) 

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Saltflow, Inc.

Saltflow, inc. is a conglomerate and has stakes in diverse fields. Saltflow was founded in 2005 by Arif Ayub, a Pakistani national. This group is based in Dubai, UAE.

Saltflow has annual revenues in excess of $570 million annually. Group is involved in a number of fields including construction industry, trade and retail industry, and technology industry. Group has expanded its presence to North America through acquisitions.

Group’s technology business is heavily centered in Russia and controls internet companies primarily targeted at mobile and financials solutions for consumers.

In North America group has stakes in retail and trade sector. Group has invested huge amounts in retail brands and is expecting good returns.

Group also has stakes in construction industry.

Presently group provides employment to more than 500 people.

related link 

Saltflow, Inc.

Success achieved by Pakistani bloggers.

Income diary has a post named ‘20 top blog sales’ that has a list of blogs that were sold for millions. In recent past a name of Pakistani blog appeared in ‘top earning blogs’ on incomediary. According to incomediary Saad Hamid’s blog Sizlopedia was making 11000 us dollars per month.

Blogging has become common in Pakistan and there are many successful bloggers in Pakistan. Recently another success has been achieved in this area by Pakistanis. Gagism.com, a humor blog, co-founded by Farrukh Zafar and Salman Saeed, has been acquired by an Australian firm for rupees 10 million (105000 us dollars approximately).  Presently gagism has a team of 6 members including two founders. 

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List of top hi tech Pakistani companies

Many Pakistani companies are doing fairly well in hi tech business. Following is the list of some extremely successful businesses.

1. INTEGRATED DYNAMICS. It is a private company that designs and manufacture unmanned aerial vehicle in Pakistan. According to chief executive Raza Sabir Khan Company has exported air frames to many countries.
2. NetSol technologies. It is a software company founded in 1995 by three brothers. NetSol now have offices in Australia, China, Pakistan, Thailand, United Kingdom and head office in United States of America.
3. Tradekey.com is third largest business to business website in the world. It was formed in 2005, and now facilitates transactions worth 100 million dollars in a month.
4. Technocraft is a web hosting company started in 2001. It also provides search engine optimization (SEO) services to businesses for just 200$.
5. Softronix is a software developing company incorporated in 2001.now it has 6 franchise offices in country, while head quartered in Canada.
6. Rozee.pk is Pakistan’s leading job portal. Over 30000 employers including multinationals like McDonald’s, Coca-Cola and many others.
7. Nayatel is a company offering broadband internet, modern telephone and digital video services in twin cities. Having 500 employees, it serves 6000 household and business units.
8.  Multilynx is a systems and networking solution providing company.
9. Mindstorm studios. A Lahore based company develops video games and other software. Its product cricket revolution was declared to be the official video game by ICC.