What’s missing from the government’s economic recovery plan

Now is the time to implement policies that will encourage private investors, public bodies, and philanthropic organizations to channel investments into the region. With the support of the Tkuma Directorate, the Western Negev should become a thriving and economically prosperous area for years to come

Recently, the Knesset approved the Tkuma Region Law, aimed at the rehabilitation and development of southern communities affected by October 7. The law expands the powers of the Tkuma Directorate and allocates approximately 5 billion shekels for economic, infrastructure, and social development in the communities surrounding Gaza, as well as other affected cities such as Ofakim, Netivot, and Ashkelon. Obviously, the same response should be forthcoming for the hard-hit Northern communities as well.

This is an extremely significant step that has received broad support and passed the Knesset without opposition and the government and MK’s deserve praise for this achievement. However, to ensure long-term growth, it is essential to integrate innovative financing solutions that will provide incentives and encourage the flow of investments and funding from business and philanthropic entities to supplement government budgets. This combination will not only enable the rehabilitation of the Tkuma region but also ensure sustainable growth and prosperity for many years to come.

Lessons from the past and the world

Wars have profound social and economic consequences, affecting human capital and social structures due to infrastructure destruction, population displacement, and migration. These factors require massive budget allocations for recovery, including welfare services for those affected, the reconstruction of infrastructure, and the repair of damaged housing. These financial burdens often lead to budget deficits and high inflation.

Following the Yom Kippur War, Israel experienced a prolonged economic slowdown, known as the “Lost Decade,” due to massive increases in defense spending and underinvestment in infrastructure, energy, and healthcare. These decisions had severe economic consequences, resulting in deep recession and soaring inflation. Only in the 1990s, thanks in part to the influx of Russian immigrants and Israel’s emergence as a global technology powerhouse, did the country regain its competitive advantage.

However, economic crises following conflicts and wars are not unique to Israel. Extensive economic research highlights successful recovery cases, such as Germany’s post-World War II reconstruction and the U.S. federal response to Hurricane Katrina in New Orleans in 2005. In both cases, innovative financial mechanisms and creative funding solutions, such as bonds and diversified investment sources, were critical in attracting both public and private investments into long-term growth projects.

Recognizing these lessons, a team of leading experts from Israel and abroad, under the leadership of the Milken Innovation Center, has compiled a comprehensive, first-of-its-kind report. This report outlines recommendations for financing projects and businesses that will not only rebuild the Western Negev but also ensure its long-term prosperity. The document details a range of tools designed to incentivize non-governmental actors to invest in the region, prioritizing it over central areas of the country.

For example, one proposed initiative is the establishment of an investment fund that blends public and private capital, providing credit while reducing financial risks for both investors and local authorities. This approach would encourage projects with social impact or technological innovation, fostering economic resilience for residents.

Another proposed measure is the creation of a Land Bank that would allow local municipalities in the Western Negev to acquire and manage unused land for community development. By leasing this land to private developers while maintaining public ownership, municipalities could generate a stable revenue stream, promote economic development, and prevent the sale of strategic assets.

Additional initiatives should be encouraged, such as those in the field of energy resilience. In a recent follow-up discussion focused on this topic, with participation from the Tkuma Directorate, research institutions, philanthropic organizations, and energy companies, a proposal was raised to establish a dedicated fund for community-based energy generation and storage projects. Such a fund would enable energy independence for localities during emergencies and help prevent the kind of power outages experienced in the settlements on October 7. The proposed model is based on public-private partnership financing and could serve as a foundation for broad economic and social development, ensuring both security and sustainability.

Israel has a long history of financial innovation in overcoming crises, and now is the time to harness this expertise for the critical national mission of rebuilding the Western Negev. By doing so, we will not only restore what was lost but also build economically resilient and thriving communities for the future. To achieve this, we must first abandon the term “periphery” in economic and social discourse—ensuring that no population or geographic area is left behind.

The approval of the “Tkuma Law” is a significant milestone, and the Tkuma Directorate is already working diligently to implement a comprehensive rehabilitation and development plan for the Western Negev. Their professional and meticulous efforts are laying a real foundation for growth. However, to realize the full potential of the region, they must be empowered with additional tools and investment channels. By incorporating innovative financial mechanisms and attracting private investments alongside public resources, we can ensure that efforts translate not only into reconstruction but also into sustainable economic, social, and demographic growth.

—

Steven Zecher co-authored this analysis. The authors are researchers at the Milken Innovation Center at the Jerusalem Institute for Policy Research and Hebrew University Business School. To download the full report in English, click here.