(LOS ANGELES) Two-thirds of Israel′s 64 developed archaeological sites are operating in the red, creating an unsustainable future for the country′s incredibly rich and potentially economically rewarding cultural heritage reserves. Thousands of others remain unexplored.
But applying business start-up financing models — including community microfinance, venture capital and development bonds — could not only help preserve and protect the country′s more than 30,000 identified archaeological sites, but also provide local and national economic growth, according to Cultural Heritage as an Economic Development Resource in Israel, a new report from the Milken Institute.
Plagued by a labyrinth of governmental authorities, lack of existing infrastructure and unique taxation and land-use policies, Israel has not capitalized on the tremendous economic potential in cultural preservation, tourism and related development, the report states.
"Like business start-ups, preservation efforts often face a 'valley of death′ after the initial excavation funding runs out," said Glenn Yago, executive director of financial research and director of the Milken Institute′s Israel Center. "By broadening the scope of financing options along the entire process — thinking of it more as a value chain — we can go from excavation to preservation to creating entire economic clusters."
The report details how community microfinance, venture-capital clusters and project financing through archaeological development funds could be deployed to bolster sustainable preservation and economic development.
Among the proposed financing solutions:
- Community microfinance, building on the example of Lawrence Coben′s Sustainable Preservation Initiative, could help local communities leverage loans, philanthropic donations and direct equity to finance targeted development.
- Israel′s tremendously successful venture capital market is a valuable source of potential funding for culture heritage cluster development, linking archaeological preservation with the tourism, small business, retail and even technology sectors.
- Relatively low-risk archaeological development bonds provide long-term project financing for preservation and can be funded by a variety of revenue streams, including antiquity leasing, media content and intellectual property and even artisan craft and replica merchandise.
Key fact points from report:
- In 2008, the Israel Antiquities Authority′s budget to excavate, conserve and develop archaeological sites was $36 million, representing 0.05 percent of the total national budget.
- Once excavated, sites are turned over to the Nature and Parks Authority, which manages the country′s 64 developed sites. The six most popular sites, including Masada and Caesara, subsidize the rest.
- In February 2010, Prime Minister Benjamin Netanyahu announced the creation of a national Heritage Infrastructure Plan, whose purpose is to renovate 150 biblical, archaeological and historical sites. He also announced a government investment of US$100 million for the program over five years.
- Models in the report could leverage this government initiative through additional private participation in archaeological conservation financing to bridge capital needs.
The report is the result of a Financial Innovation LabTM that pulled together a diverse group of researchers, policymakers, and business, financial and professional practitioners. The report captures the potential solutions that were discussed during the lab. Financial Innovations LabsTM are part of the Milken Institute′s continuing leadership in promoting financial innovations to help solve ongoing social, economic and environmental challenges.
Cultural Heritage as an Economic Development Resource in Israel is available for free download after online registration at www.milkeninstitute.org.