A Recovery and Economic Development Plan for Northern Israel: The Day After, I


In the aftermath of the war in Lebanon, the Northern region of Israel is struggling to recover. According to the Israeli Finance Ministry, the July 2006 Second Lebanese War will cost up to $5 billion.

Even before the war, the Northern region had already experienced a relatively weak labor and housing market, and lower performance in commercial and industrial activities than the national average.

To successfully achieve growth and development, the region requires an influx of capital. But traditional funding sources, such as government agencies or foreign aid, are typically insufficient or cumbersome to access, particularly for Northern Israel. Therefore, the region needs to focus on alternative funding options.

As part of the Financial Innovations Lab series, the Milken Institute researched and explored several alternative financing options for facilitating recovery and growth in post-war Northern Israel. The first of these labs was held at the Milken Institute in Santa Monica. The second was held on Sept. 15 in New York City (view summary).

Participants at the first lab explored an array of financing options. Over the course of discussion, participants determined that two alternative funding options were the most feasible and pressing: development of a bond authority for infrastructure and public-private projects, and expansion of the KIEDF Small Business Revolving Loan Fund model.

Through development of a bond authority, the government and private partners can raise capital for needed infrastructure, such as expanded highways and renovated rail lines, which will bring business to Northern Israel. With expansion of the Small Business Revolving Loan Fund model, the area's entrepreneurs will receive a much-needed influx of working capital at favorable rates.