SEKEM Insight 07.11 EN

Nr. 107 - July 2011

Insight

SEKEM‘s Journal for Economy, Culture, and Society in Egypt

Editorial Dear Readers,

When Helmy Abouleish was taken into detention on remand on 29 March and brought to Cairo’s well-known Tora prison, where the sons of Hosni Mubarak are also detained, nobody could know how long his absence from SEKEM would last. When he finally returned, he had been gone for almost 100 days.

Interview

Case and Sentence

Sustainability

Interview with Helmy Abouleish

What it Was Really All About

Development Report 2010 to be Published

“SEKEM Must Remain a Living Example for Sustainable Development” Helmy Abouleish was released from custody on remand on 6 July. In our interview he talks about his time in prison and his plans for the future.

The ruling which was spoken on 5 July met with great relief among the family and all friends of SEKEM in Egypt and around the world. Helmy Abouleish was eventually set free again. However, the judge’s decision also gave rise to confusion because Helmy had not been acquitted. He had in fact been sentenced to one year on probation and the payment of a penalty sum.

Therefore, this issue of SEKEM Insight will examine the background of the initial indictment that led to the detention, Helmy’s experience of his time in prison and how he used it, and how he now imagines his future and that of SEKEM. An additional in-depth article will explain the specifics of the case and the verdict.

Your Team of Editors Find SEKEM also on the Internet at:

In this and the following pictures Helmy Abouleish is speaking to employees of the SEKEM companies at the Heliopolis Academy after his return to the initiative.

O

n 6 July 2011 Helmy Abouleish was released from detention in Cairo’s Tora prison after almost 100 days. He has in the meantime returned to the SEKEM farm and to his workplace as CEO of the SEKEM companies.

In our conversation immediately after his return Helmy tells the story of his time in detention and the reasons for his being taken into custody in the first place as well. He also talks about his plans for his future and that of SEKEM. SEKEM Insight complements the inter-

view with a focus article on the background of the case and the sentence on page 4.

Your arrest came as a huge surprise for all SEKEM friends and you yourself...

Yes, especially when you consider the circumstances of my imprisonment. The complaint that led to my eventual arrest was in fact submitted at an extremely early time, namely on 8 February. On 11 February only Hosni Mubarak SEKEM Insight | July 2011 | Page 1

Economy

„

stepped down. At that time there was still chaos all over the country. And although the Egyptians in those days were still demonstrating in the streets of Cairo, one person is supposed to have found the time to lodge a complaint against me and many other people in public life at.

I‘ve never considered this process very credible. I think it might well have been one of the last attempts of the Mubarak administration to appease the Egyptian revolutionaries by cracking down on allegedly corrupt and well-known people.

I never saw myself as a victim of the revolution but as one of the former regime.

It is also important to understand that already 6 years have passed since I worked for the IMC. The fact that these charges are brought now seems to me to be hardly a coincidence either. Of course, this would also be a great way to distract from Egypt’s real domestic problems. Hosni Mubarak‘s successor, Defence Minister Hussein Tantawy, has always been critical towards any public engagement of the local private sector. Plus, the military generals, the Attorney General and many judges were also appointed during Mubarak’s times.

One also has to keep the „pressure of the street“ in mind, which is also aimed directly against public officials. They have already promised to hand the 720 billion Egyptian pounds allegedly misappropriated

by Mubarak’s regime back to the people.

When you consider all of this, I think it does cast a special light on the circumstances of my arrest. However, I have never seen myself as a „victim“ of the revolution, but rather of the old regime.

How have you kept your motivation strong during the nearly 100 days of your detention?

It may sound hard to believe, but I have not found it a particularly difficult time. For me the inner peace that came over me in the very moment when the prosecutor read out the charges was a very special experience. This moment brought me tranquillity and peace of mind and the strong conviction that whatever Allah may still have in stock for me, it would first and foremost be an opportunity that might turn out to make me stronger. In fact, I was never fearful.

In prison, I have tried many times to alleviate other people’s suffering through extensive talks. Not all could always be drawn out of their misery, but I think they have taken away more hope from our conversations. I have tried to strengthen our collective optimism and at the same time to preserve my sense of humour. It was known, for example, that I would not participate in any „negative“ conversations. Many have told me over the time that they would pray for me. This also gave me confidence.

I myself gave me a rigid daily schedule. I decided to walk at least 5,000 steps every day and always had a pedometer on my belt. I also founded a „Salon Sakafi (“culture

club”), in which we talked every night one and a half hours about certain topics I had suggested, to get us out of our constant brooding and gloomy moods. We spoke, for example, about the freedom of man, the connection between the public good and the economy, or the economic rules prescribed by the Quran. It was wonderful to see how the moods of many lightened during these talks at least for a short time.

For many it is difficult to understand how, despite your commitment, you could be convicted in the first place...

In essence, case is all about the question which set of rules should govern the activities alleged by the prosecutor. According to the regulations of the IMC, to which I as a CEO and later management board member have always kept, any support that ever went to the SEKEM companies has always been perfectly legal. Of this I remain firmly convinced, and this interpretation has also been confirmed by independent assessments many times. The many instruments of control of the IMC and the European Union, which have verified my work on a regular basis, have confirmed also this. The court, however, eventually opted for an interpretation that is not conSEKEM Insight | July 2011 | Page 2

Economy

sistent with this. This is why I have decided to appeal the sentence.

What do you personally think of the sentence?

When you consider the severe punishment of others who are currently being sentenced one must consider the ruling as to be extremely mild. I still think it is wrong, of course.

You were also sentenced to the payment of a penalty. What is that about?

Besides the one-year suspended sentence, to which I was sentenced, I have also been ordered to repay funds disbursed to SEKEM companies and pay an additional penalty in the amount of the value of these funds.

However, it is important to add that SEKEM firms have never actually received this money. Funds from the IMC always go to third party suppliers and providers of the services from which companies like those of SEKEM may then benefit.

How did the public respond to your arrest and the sentence?

In advance of the trial, there had been lots of speculation. I was positively equated with the person of Rashid Mohamed Rashid, the former trade minister. He should have been taken to prison together with me but was later convicted to a long prison sentence in absentia.

Later, the press mostly reported fairly and in a generally differentiated fashion. Given the current situation, the incited public mood, the many provocations, and the constant criticism of public figures, that was not to be expected. Eventually, it is still the press of the days of the Mubarak regime.

Why did you decide to engage yourself in public affairs in the first place?

I originally wanted Egyptian businesses being held responsible for the sustainable development of the country. We can not leave positive change only to the governments and civil society. Companies also

need to contribute to the common good. Because of their financial and practical means they are also potent players in the game who can change a lot and that relatively quickly.

In fact, much of what I initiated during these times still is a part of the political debate in Egypt. Today, the popular project „Vision for Egypt 2030“ that I had cofounded in 2004, the Egyptian strategies for greater economic competitiveness, better industrial and agricultural development and the fight against climate change, which I all initiated together with others are still part of the daily political discourse in the country.

That I find very satisfying.

Is the impact of your work and that of SEKEM sufficiently known in Egypt?

As we all know, we only ever hear the answers to questions we ourselves have. Many people in Egypt still have quite different, much more elementary priorities. Against the backdrop of the current difficult situation in the country this is very understandable.

SEKEM already publishes a lot on its own projects, but it is not so easy. I see the biggest challenge in doing more for awareness raising and the actual multiplication of our existing, successful initiatives.

If you looked back, would you do something differently?

I would certainly try again to realise the things for which I personally want to stand in just the same way.

But I do see that I became involved on too many sites at once. I have been active in approximately 50 national and international committees! I would now put more emphasis on visible results rather than pure activism and a more fruitful balance between my public engagement, the needs of SEKEM, and those of my family.

What would you like to focus on now in your own work?

The intellectual and spiritual understanding of my own actions has

„

The intellectual and spiritual understanding of my own actions has become more central for me over the past weeks.

become more central for me over the past weeks.

In Egypt, I would like to continue to commit myself to the sustainable economic development of the country and its businesses.

Internationally, I would like to concentrate myself primarily on SEKEM’s International Association for Partnership in Trade and Ecology (IAP) (see SEKEM Insight 06.11).

These are also the areas where I can currently see that SEKEM could have the biggest impact in terms of positive and sustainable change.

But the most important thing is that SEKEM continues to work on itself, to remain a living example and positive role model for others. I would like to continue the work for SEKEM to stay a good example of how to make it better.

Questions posed by Maximilian Boes and Soraya Abouleish.

Recorded by Bijan Kafi.

SEKEM Insight | July 2011 | Page 3

Economy

The Case and Sentence Against Helmy Abouleish During the trial against Helmy Abouleish the court debated a complex case of international cooperation. Conflicting legal opinions dominated the proceedings.

W

ith the verdict of 5 July against Helmy Abouleish a trial came to a close that had never targeted neither the SEKEM Initiative nor any of its firms and institutions. Instead, the court ruled over Helmy Abouleish’s alleged conduct during his work for a facility established by cooperating international partners. In many ways the verdict thus reflects the many complexities and intricacies of such projects and the difficulties of deciding which legal framework to apply when judging over their conduct.

Role in the IMC

The Industrial Modernization Centre (IMC) is the largest fund for economic development in Egypt. It was initiated by the European Union, the Government of Egypt and the Egyptian private sector in 2000 as a cooperative project. Its aim was to help the Egyptian private sector to become more competitive and sustainable.

In April 2005, Helmy Abouleish decided to respond to the invitation to become the IMC’s managing director for one year because he saw a unique opportunity to assist the private sector in Egypt to live up to its abilities to lead sustainable change in the country.

The IMC supports Egyptian companies by funding third-party suppliers and service providers. The funding is not directly disbursed to a supported company. Instead, the fund finances the service providers who in turn provide training or consultancy services to the corporations. They help, for example, with the introduction of quality standards, conversion to the principles of sustainable management, improvement of energy efficiency, or

the formulation of codes of conduct for employees.

After his first few years with only little success, the IMC management in 2005 took the decision to involve the private sector more closely in the allocation of funds. In this context Helmy Abouleish took over the role of managing director for the period up to December 2006.

After the first year under new management the European Union decided to fully hand over the responsibility for the management of the facility to the Egyptian authorities and the private sector. This step proved to be a great success. The IMC is still in operation today and has so far been able to support approximately 15,000 companies in the transition to a more competitive and sustainable management practice.

No Conflicts of Interest As Helmy Abouleish accepted the new role, it became clear that conflicts of interest could potentially arise.

Measures were taken to prevent them in the first place. Firstly, subsidies to SEKEM companies already in progress of being disbursed were analysed and listed. It was found that these projects would have to be completed soon and that no further applications should be filed. Additionally, Helmy Abouleish also refused a salary for his position as CEO of the IMC. After completing his term as managing director Helmy Abouleish was asked to continue to chair the management board of the IMC, a monitoring body with no executive powers. In this context he decided that SEKEM companies would only be allowed to apply for new projects after a grace period of

Tora Prison, the place where Helmy Abouleish was held.

nine months after he had left the post of CEO. The expenses of the IMC had been under strict monitoring (auditing) since its inception. All funds were expended in accordance with the in-house manual of procedures.

Moreover, the competent authorities of the European Union re-examined all expenses on a regular basis.

In addition, an independent auditing firm oversaw contracts and expenditures alike. A dedicated committee approved the IMC’s own annual audit report.

Charges After Helmy Abouleish’s arrest in March 2011 it was announced that an unidentified plaintiff had lodged a complaint against Helmy Abouleish and two other individuals including the former minister of trade. It consisted of three points on which Helmy was subsequently interrogated.

Firstly, it was asserted that external consultants had been hired in an illegal fashion, that is contracts had allegedly been awarded without a proper tendering procedure. After an SEKEM Insight | July 2011 | Page 4

Economy

examination of the facts by the court this point was quickly dismissed.

The second charge alleged that the process through which SEKEM had rented out a building to the company FTC (Food Technology Centre), a site where FTC today operates an herb drying facility, had been intransparent and had subsequently lead to a misappropriation of assets. Again, this point was dismissed after thorough examination.

In a third point Helmy Abouleish was accused of having allowed SEKEM companies to benefit from IMC funding after his time as CEO of the fund and while he was still on its management board. It was alleged that SEKEM companies had no right to benefit from support services of the IMC during this time. The trial focused solely on the clarification of this remaining point.

The prosecutor implemented a commission of experts in charge of examining the allegations. The commission completed its research in February 2011 and declared the allegations to be groundless. Nevertheless, custody on remand of Helmy Abouleish was decreed in late March.

Unclear Legal Situation Already before the trial the IMC had obtained a legal opinion that considered the lending practices later criticized as having been in full accordance with the law and the IMC’s own procurement policies. The internal procedure manual specifically allows such funding practices.

The background to this appraisal is the “Law of Cooperation 66-1999”, which governs cooperative entities such as Public-Private Partnerships born out of cross-border collaboration projects. In fact, the law had been created specifically in the course of the establishment of the IMC. An entity established on the basis of this law is by definition not a purely Egyptian authority but a community facility subject to complex regulations and special rules, which combine and span

several legal frameworks of all participating partners.

Verdict In the verdict of 5 July, Helmy Abouleish has now been sentenced to 1 year probation, repayment of subsidies, and payment of an additional penalty. The sentence was first and foremost a decision on which regulatory framework to apply to judge the legality of the actions in question.

The judgment concerning the legality or illegality of the practice rests on this assessment of the legal framework. The court decided to follow the position of the prosecutor and thus an interpretation that differs markedly from that of Helmy Abouleish and internal and external experts. Though the European Union and the Egyptian government jointly set up the IMC, the prosecution had requested for it not to be regarded as an institution whose activities are governed by a special law. It was asserted that the IMC should instead be treated as a regular Egyptian authority entirely governed by national law.

Difficulties of International Cooperation The verdict reflects the difficulty of the course of justice coming to terms with a complex situation of overlap​​ ping responsibilities and interests, which had also changed more than once since the foundation of the IMC. Whether the now condemned activities have been lawful or not thus becomes a question of clarification what the applicable legal framework to make this judgment is in the first place. This is a question that Helmy Abouleish has already answered for himself: he has announced to appeal both the verdict and the assessment of the penalty payment.

Bijan Kafi Bijan Kafi is the contact person for press and public relations of the SEKEM Initiative in Europe.

You can visit SEKEM yourself: www.SEKEM-reisen.de www.aventerra.de

SEKEM to Publish New Report on Sustainable Development

A

t the end of August SEKEM will publish the fourth “Report on Sustainable Development in SEKEM 2010”. This year the report will focus on the cultivation of desert areas and their importance for sustainable development. It makes clear how SEKEM does not intend to reap only economic profit, but instead establish a culture of value creation in harmony with nature and the social environment.

After several years of publication the report has developed into a viable institution of relevance not only to external communication but also to fostering internal awareness within the SEKEM companies. Along the four dimensions of economy, society, culture and environment, the reader learns about all facts concerning current achievements and new challenges.

The annual report summarizes in words and pictures the progress of Dr. Ibrahim Abouleish’s vision to build an initiative that promotes community and protect and care for the environment along all four dimensions. The framework works with the „Sustainability Flower“ (SEKEM Insight reported) and a subsequent, continuous monitoring of daily operations.

To achieve a reliable result SEKEM managers from all companies and institutions are involved in the survey process. Every year they are faced with analysing the performance targets and to describe the current situation. Their awareness of the issues of sustainable development is thus sharpened. Since 2011, this process has been carried forward on a biweekly basis.

The report will be available for download from the Internet through SEKEM’s website, regular publication outlets, and in print.

Anne Mordhorst Anne Mordhorst works on the management team for sustainable development at SEKEM and on the preparation of the sustainability report.

SEKEM Insight | July 2011 | Page 5

Economy

The Performance of the SEKEM Group Companies During the 2. Quarter 2011

Sales (consolidated)

Sales (consolidated) The economically difficult period that began with the revolution which started last January continues in the second quarter of 2011. For the SEKEM companies the second quarter of 2011 ended with similar sales figures as the comparison quarter from one year earlier. Both quarters closed at 48 mio. Egyptian pounds.

Q2 2010

48 Mio. EGP

Q2 2011

48 Mio. EGP

EBITDA (consolidated)

EBITDA (consolidated) In EBITDA (consolidated) the second quarter of 2011 also precisely resembles the figures of the corresponding period of last year. Both quarters closed at 10 mio.

Egyptian pounds.

Q2 2010

10 Mio. EGP

Q2 2011

10 Mio. EGP

Shares of operations in sales mix

Shares of Operations in Sales Mix The shares of operations in the sales mix moved slightly during the 2nd quarter of 2011. While the shares of agricultural products and food as well as consumer goods (FCMG) declined, those of the pharmaceutical and textile rose sector by 1% respectively.

18%

16%

16%

Farming

Pharma

50%

Textiles

FMCG

Sales (domestic vs. abroad)

Sales (Domestic vs. Abroad) The sales volumes “domestic vs. foreign� shifted during the second quarter of 2011 compared to the same period one year earlier by 4% in favour of the export business.

Q2 2010

Q2 2011

74%

26%

70%

30%

Local

Export

SEKEM Insight | July 2011 | Page 6

Impressions

Impressions from SEKEM

V

ery small and yet so powerful. Fenugreek seeds such as these have also been exported by SEKEM in 2009 to clients in the European Union. 9 tons of them, to be exact. SEKEM’s company Lotus shipped them to the Netherlands in 2009 and 2010. They were, of course, thoroughly examined by SEKEM and its customers. It was established that they have not been a part of the total of 15 tons of seed that reached the port of Rotterdam and the German and French traders at which the EHEC bacteria was found.

It was important for SEKEM to quickly and transparently inform the public that its products are safe to consume. Therefore, it published a press release even before the imposition of an import stop for many Egyptian seeds and oil seeds. Nevertheless, SEKEM is also affected by the ban. Still, all customers of products in which SEKEM seeds are included can be confident that they meet the highest quality standards for organic products.

SEKEM Insight | July 2011 | Page 7

News in Brief

Heliopolis Academy Seen as Role Model

Visitors Flock to SEKEM Speeches at Uni Bayreuth

GLS Bank Turns Savers Into Aid Workers

On 7 and 8 July the consortium of the UNCHAIN e ​​ ducation project (University Chairs on Innovation) met in Vienna to discuss the progress of the project in which also the Heliopolis Academy is involved. Institutions modelling the Heliopolis Academy have now been established at Cairo University and at institutions in Morocco, Tunisia, Syria, and Lebanon. They serve as innovation centres that aim to better link the worlds of academia and industry.

On 11 July the SEKEM employees Bianca Fliß and Jasmine Ateia gave a lecture to students at the University of Bayreuth on the topic „Egypt after the revolution - a country full of challenges“ was well attended and met with the interests of the students. University staff also joined the discussion.

Oikocredit and GLS Bank now turn the holders of savings accounts into development workers through the Oikocredit Savings Account that allows savings to be used as loans to individuals in developing countries.

The aim of the cooperation is to provide a secure and meaningful way of allowing disadvantaged people access to capital.

Over the past two years over a hundred university employees have been trained in the project. Moreover, close partnerships to stimulate lasting innovation in the long term have been created. Eventually, two members of the SEKEM staff, Dr. Mohamed Abdou Wageih and engineer Dalia have also been trained at the Technical University in Graz on the topic of product and process innovation with the help of renewable energy .

In particular, the University of Cairo has been able to successfully build good partnerships with businesses.

The future cooperation of the innovation network was also discussed during the meeting.

The UNCHAIN strives to improve understanding of and cooperation between academic research and business. Demand stemming from business challenges shall be answered through interdisciplinary study by teams of experts and students. A company builds contacts to highly qualified students while they in turn receive the opportunity to collect relevant experience. The Heliopolis Academy is well known in this project as an example of successful cooperation between industry and research institutions.

Bianca Fliß

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More information:

The lecture focussed on the multifaceted challenges Egypt currently faces after the disruptions of the January revolution. Special consideration was given to the topics of population growth, poverty, water scarcity, food, and education - all issues of specific interest to the participating students.

Jasmine Ateia, a native Egyptian, reported on her personal experience and impressions from the days of the Egyptian revolution and was thus able to put them into the proper context.

The following discussion centred on the actual influence of fundamentalist forces in today’s Egyptian society, specifically those parts of the population driving the revolutionary activities. The students were very critical of media reports and particularly interested in the views of Egyptians who could provide them with accounts of personal experience. Generally, topics discussed ranged from broad policy issues and the future of Egypt to questions about the effects of climate change on agriculture in the desert. „We received very positive feedback“, says Bianca Fliß. „In particular, the connection of more general country studies to the actual events of the revolution and Jasmine‘s very personal reports met with exceptional interest. Many told us that they would now have a much more realistic picture of how the various challenges Egypt faces are mutually dependent and interconnected.”

The unique concept is focused on the social impact of the funds: Investors open an Oikocredit savings account at the GLS Bank. The GLS Bank grants a loan in the amount of money invested to Oikocredit, which in turn funds partner organizations in developing countries to provide financial services.

A part of the capital goes to microfinance organizations that award small loans locally. Another part benefits cooperatives, fair trade organizations, and small businesses. „The new savings account is aimed at investors specifically interested in improving the living conditions of people in developing countries“, explains board member Andreas Neukirch from the GLS Bank.

Source: GLS Bank

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More information: http://www.gls.de http://www.oikocredit.de

Masthead: The editors of SEKEM Insight wish to thank all contributors to this issue.

Editor: Bijan Kafi Contact: SEKEM-Insight c/o SEKEM Holding P.O.Box 2834, El Horreya, Heliopolis, Cairo, Egypt insight@SEKEM.com Pictures: Pages 1, 2, 3: Martina Dinkel; 7: SEKEM No republication without written consent by the publisher.

http://www.unido.org/index.php?id=o66410

Bianca Fliß

SEKEM Insight | July 2011 | Page 8