Sleepy Israeli town wants to reach new highs with medical cannabis

Israel’s southern town of Yerucham is just some 126Km (78 miles) south of Tel Aviv, a two-hour leisurely drive, but it could feel like light years away from the nation’s secular high-tech mecca, where young entrepreneurs whiz from meetings at trendy cafes to hang out at the beach with friends after work hours, most likely lighting up a joint along with their chilled beer.

On a winding road to the town, inhabited by some 10,000 and dogged by high unemployment levels, sand-yellow desert hills reflect the bright light and signs that say “Beware of Camels.”

The main street of this southern city was eerily quiet on a sunny, hot, dry summer day earlier this month — a Shawarma place was dishing out pita bread filled with piping hot grilled meats, hummus and salads to tired diners who sat around Formica tables. An air-conditioner whirred loudly in the background.

A hairdressing salon was barred shut. Opposite the salon, on the other side of the street – no traffic or parking problems here – a modern looking kindergarten was silent, the children home for the summer holiday.

A macolet, or a grocery store, is open, where children are buying sweets, happily waving their newly purchased goodies as they run out. The manager, 43-year-old Avi Biton, a former employee at Teva Pharmaceutical Industries Ltd., was laid off some two years ago from his job at the generics drug-maker’s plant in the nearby Ramat Hovav facility.

Not much happens in this sleepy town. But earlier this month, Yerucham saw some big-city action when busloads of businessmen and entrepreneurs arrived in the town, many of whom were likely visiting for the first time.

“A lot of businessmen came here for a conference, in many buses,” Biton said, his eyes lighting up, as earlocks shook at the side of his face, under a big knitted skullcap that covered his head. “They want to transform the city into a leading medical cannabis center.”

Indeed, some 270 entrepreneurs, including former Prime Minister Ehud Barak, came to the city to find out how Yerucham is the perfect location for cannabis research, cultivation and exports.

Barak, who recently returned to Israel’s political scene, seeking seats in the Knesset elections scheduled for September, was appointed last year as the chairman of medical cannabis holding company InterCure.

“In five years, Yerucham will be the capital of medical cannabis in Israel, nothing less,” Yerucham’s first woman mayor Tal Ohana, told the audience of investors, entrepreneurs and regulators who were in attendance. The industry can create 500 new, high-quality jobs in production, research and also exports, she told them, laying out her vision.

Israel, already known as Startup Nation, with more than 6,600 startups, is also a player in the field of medical cannabis, with the Israeli export market of the weed estimated to be between NIS 1 billion to NIS 4 billion ($282 million to $1.1 billion), according to government data.

Medical experts involved in the country’s booming cannabis industry have said Israel has the potential to be a global cannabis hub due to a number of positive factors. The country has a critical mass of scientists and clinicians familiar with and open to medical uses of cannabis, a strong biotech industry and researchers in leading medical institutes and universities and, most importantly, a Health Ministry that is generally supportive of medical marijuana.

In January, Cabinet ministers approved the export of medical cannabis, paving the way for Israeli marijuana growers to begin international sales, though exports are not expected to begin until bureaucratic procedures governing the process are put in place.

Yerucham is ideal for the growth of cannabis, Ohana told potential investors. Its location in the eastern Negev desert, at an average of 524 meters above sea level, creates an ideal environment to grow the weed, There is with very little rain, few clouds and plenty of natural sunlight.

The area can also allocate cheap land for hothouses for growing the plant. Yerucham has vast areas of land that is approved for agricultural incubators, that can be immediately allocated to medical cannabis greenhouses, a document published by the municipality said. These lands are located some 500 meters from the industrial zone, where existing areas and structures can be used to process the cannabis for its medical applications.

Two large industrial structures in Yerucham, factories that have shut down, can be redesigned with minor changes, repurposing them for the processing of cannabis, the document explains. The town operates a water purification facility with water that is approved for agricultural purposes, reducing costs, and sufficient for irrigating Yerucham’s entire cultivation area, according to the document.

These new industries can tap into workers who have been fired from traditional industries – like the recently shuttered makeup manufacturer Emilia Cosmetics, and also tap into workers from the local plant of drug manufacturer Perrigo. Perrigo’s R&D facility in Yerucham is made up of local residents, giving the city a “pharmaceutical DNA,” the document said.

On top of this, Yerucham is considered a national priority area for investments by the government, which allows land to be allocated without a tender and provides subsidies of 90% of the costs of developing sites for industrial purposes, the document said.

The idea is to “create an ecosystem” for the industry to grow locally, Ohana said in a phone interview with The Times of Israel.

The municipality also hopes to transform the town by setting up a robots-run pharmacy for medical cannabis and a logistical warehouse, to deliver the medical cannabis produced locally to foreign markets. These facilities would make use of the newly opened international Ramon airport in Eilat, once the government gives the green light to exports.

Since the conference, some 30 medical cannabis firms have already approached the municipality, requesting more information and the possibility of getting government aid, she said.

Ohana said she will be meeting with the companies. If even just six or seven of them decide to set up in Yerucham “we will have done a great thing,” she said.

IDF spillover effect

Yerucham is hoping to benefit from a spillover effect of a massive move the Israel Defense Forces plans to implement over a number of years of many of its intelligence units to the southern city of Beersheba — as part of a multi-year plan to streamline and digitalize the giant institution.

The IDF’s move will bring a rise in demand for homes, including in Yerucham, by soldiers who will move south with their families, the Yerucham believes. Together with the finance and defense ministries and the Negev Development Council, the town has geared up for an injection of new blood, by building a new residential neighborhood, parks, child development centers and bike paths. The first stage of the residential neighborhood has been completed and rented out to IDF personnel, said Ohana, with a second stage of the new neighborhood underway.

Not only that. Alongside cannabis, Ohana wants to channel the town toward new directions, following a wake of closures of low-tech or traditional industrial ventures in the town: Emilia Cosmetics, a maker of beauty and skin care products, shuttered its loss-making plant in Yerucham earlier this year, while in 2017 a ceramics manufacturer, Negev Ceramics, closed its doors and laid off 140 local workers. Now, glass-bottle maker Phoenicia Glass Works Ltd., with more than 200 employees, is also under threat of closure due to low profitability.

“We must wean Yerucham from its dependence on the traditional industry,” Ohana said.

Yerucham refuses to continue to be the “woodcutters and water drawers” of the Israeli industry, she said, referring to the biblical reference (Devarim 29:9-11) of the workers who are at the lowest of the value chain.

Ohana said her mission as the city’s leader is now to promote a local industry that is “tech based,” and that can be profitable over time and pay out high salaries. “I won’t open my gates to those who want to pay minimum salaries,” she said.

Her vision is to base the town on five main pillars: cannabis, with an emphasis on R&D and on R&D and pharmaceuticals; desert tourism, by creating attractions in the desert for tourists, including possibly a resort on the edge of a crater adjacent to the town; building up the presence of defense industries locally; creating a logistics infrastructure for the packaging and delivery of cannabis and pharma products; and the town is looking to draw the lucrative high-tech industry to its gates, through the setting up of new commercial spaces suitable for startups and tech firms.

Ohana also hopes Amazon will decide to set up a data center locally.

“If I manage to set up these five fields, the economic future of Yerucham will be in a completely different place from today,” she said.