    [Senate Hearing 110-368]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 110-368

     S. 2232, THE FOREIGN AID LESSONS FOR DOMESTIC ECONOMIC ASSISTANCE ACT
                                    OF 2007

    =======================================================================

                                    HEARING

                                   before the

                          COMMITTEE ON INDIAN AFFAIRS
                              UNITED STATES SENATE

                           ONE HUNDRED TENTH CONGRESS

                                 SECOND SESSION

                                   __________

                               FEBRUARY 27, 2008

                                   __________

             Printed for the use of the Committee on Indian Affairs

                                    ----------
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    41-133 PDF                       WASHINGTON : 2008

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                          COMMITTEE ON INDIAN AFFAIRS

                    BYRON L. DORGAN, North Dakota, Chairman
                     LISA MURKOWSKI, Alaska, Vice Chairman
    DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
    KENT CONRAD, North Dakota            TOM COBURN, M.D., Oklahoma
    DANIEL K. AKAKA, Hawaii              JOHN BARRASSO, Wyoming
    TIM JOHNSON, South Dakota            PETE V. DOMENICI, New Mexico
    MARIA CANTWELL, Washington           GORDON H. SMITH, Oregon
    CLAIRE McCASKILL, Missouri           RICHARD BURR, North Carolina
    JON TESTER, Montana
           Allison Binney, Majority Staff Director and Chief Counsel
         David A. Mullon Jr. Minority Staff Director and Chief Counsel

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on February 27, 2008................................     1
    Statement of Senator Dorgan......................................     1
    Statement of Senator Inouye......................................     4
        Prepared statement...........................................     4
    Statement of Senator Murkowski...................................     3

                                   Witnesses

    Anderson, Ralph, CEO, Bristol Bay Native Association.............    20
        Prepared statement...........................................    22
    Applegarth, Hon. Paul V., CEO, Value Enhancement International...    26
        Prepared statement...........................................    30
    Brink, Zack, Executive Vice President, Association of Village
      Council Presidents.............................................    24
        Prepared statement...........................................    25
    Crow, Matthew, Deputy Assistant Secretary for External Affairs
      and Communications, Economic Development Administration, U.S.
      Department of Commerce.........................................     8
        Prepared statement...........................................    10
    Kitka, Julie, President, Alaska Federation of Natives;
      accompanied by Byron I. Mallot, Director, Sealaska Corporation.    16
        Prepared statement...........................................    17
    Stevens, Hon. Ted, U.S. Senator from Alaska......................     5
        Prepared statement...........................................     7

                                    Appendix

    AVCP/BBNA, joint funding proposal................................    46
    National Congress of American Indians, prepared statement........    43
    Support Resolutions for the ``Native American Challenge
      Demonstration Project Act''....................................   129

                     S. 2232, THE FOREIGN AID LESSONS FOR
                    DOMESTIC ECONOMIC ASSISTANCE ACT OF 2007

                                  ----------

                          WEDNESDAY, FEBRUARY 27, 2008

                                           U.S. Senate,
                                   Committee on Indian Affairs,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 9:35 a.m. in room
    485, Russell Senate Office Building, Hon. Byron L. Dorgan,
    Chairman of the Committee, presiding.

              OPENING STATEMENT OF HON. BYRON L. DORGAN,
                     U.S. SENATOR FROM NORTH DAKOTA

        The Chairman. We will begin the hearing today. My
    colleague, Senator Murkowski, is on her way and will be here
    momentarily. I will make an opening statement and I expect she
    will be here and I will recognize her for an opening statement.
    Then we have Senator Stevens, who has joined us, who will be
    the first witness.
        Today, the Committee is going to hold a hearing on S. 2232,
    the Foreign Aid Lessons for Domestic Assistance Act of 2007.
    This hearing is being held at the request of Vice Chairman
    Murkowski. Witnesses will include representatives from the
    Administration, various tribal leaders, and experts on economic
    development initiatives that are included in this bill.
        As many of us know, there are obstacles to individual
    Indians and to Indian tribes that wish to stimulate economic
    development in their communities. Many of the communities
    continue to face extreme poverty, severe health disparities,
    overcrowding and substandard housing, substance abuse problems,
    a weak education system, and the list goes on.
        I think most of us would say this is unacceptable and we
    have to change it. One of the ways to change is to provide more
    opportunity and jobs. Similar to Third World countries, many of
    the social issues faced by Indian tribes in America are a
    result of underdeveloped and unstable economies and
    governments.
        Stable economic growth for these communities, creating jobs
    and lasting livelihoods, ought to be a paramount goal for all
    of us. I think there are many different ways and many
    possibilities and policy choices for how to improve economic
    development in Indian Country. There are opportunities with
    respect to energy development that I think are very significant
    opportunities on Indian lands; and opportunities in the
    information technology sector. For example, the Mandan-Hidatsa-
    Arikara Nation, in my State, own and operate a successful
    document conversion program that is providing very important
    jobs.
        Today's hearing will focus on a legislative proposal that
    has been offered by Senator Stevens to create an economic
    development pilot project in Indian Country modeled after the
    Millennium Challenge Corporation. In 2004, the Congress
    authorized the Millennium Challenge account to be managed by
    the Millennium Challenge Corporation. It seeks to provide
    assistance through a competitive selection process to
    developing nations that are pursuing political and economic
    reforms.
        I look forward to all of the testimony today and to the
    perspectives on the merits of this proposal and other proposals
    before us that would deal with economic development. We have
    asked our witnesses to provide full written statements, and ask
    that witnesses would summarize their comments in five minutes
    or less.
        Let me say that at the request of Senator Murkowski, I am
    holding this hearing. There are a wide range of proposals on
    economic development that we will and should consider. This
    piece of legislation, authored by our colleague, is one of
    those, and we are very pleased that he is able to be with us
    today to explain the legislation and the purpose and intent of
    the legislation.
        We established this hearing on relatively short notice last
    week, and I am going to ask Senator Murkowski to chair the
    second half of the hearing today. I can only be here for the
    first half. But let me thank her for recommending this hearing,
    and recognize Senator Murkowski for an opening statement.
        Before I do, I do want to say, however, and we will do this
    more appropriately at a later date, but yesterday on the floor
    of the United States Senate for the first time in 16 years, the
    United States Senate passed a piece of legislation to improve
    Indian health care. That is no small feat. It has taken us year
    after year after year after year to convince the Senate finally
    to move forward on Indian health care.
        My colleague, Senator Inouye, who has just entered the
    room, has been Chairman of this Committee for many, many years,
    and has worked on this issue. My colleague, Senator Ben
    Nighthorse Campbell worked on this issue. Our colleague,
    Senator McCain, worked on it as Chairman of the Committee. My
    colleague, Senator Murkowski worked on it with me.
        I couldn't be more pleased that we have finally, at long,
    long last, made some progress. I look forward to the House
    passing its bill and having a conference, and with Senator
    Murkowski and other members of this Committee being able to
    send a bill to the President for his signature. For the first
    time in 16 years we will have made a step in the right
    direction on something that is not optional, something that is
    mandatory, and that is keeping America's promise with respect
    to the health consequences and the health delivery system for
    the first Americans.
        So Senator Murkowski, thank you for your work on that
    important piece of legislation. I know you felt, as I did
    yesterday, that it was a significant victory for those who are
    the first Americans.
        Senator Murkowski?

                   STATEMENT OF HON. LISA MURKOWSKI,
                        U.S. SENATOR FROM ALASKA

        Senator Murkowski. Thank you, Mr. Chairman.
        It was a very good day yesterday for Indian Country. I
    think we would all agree. I had an opportunity this morning to
    meet with a good handful of constituents from Alaska, many
    coming from our villages, many Alaska Natives. The enthusiasm
    is shared, let me tell you, about finally after all these years
    moving the Indian Health Care Improvement Act through the
    Senate.
        So I appreciate your leadership on it, and know that we are
    only halfway, but it is a very good start, and I look forward
    to advancing that.
        I want to thank you, Chairman Dorgan, for agreeing to take
    up the legislation that we have in front of us today, the
    Foreign Aid Lessons for Domestic Economic Assistance Act. I
    want to thank those that have traveled quite a ways to be with
    us here this morning. We have a few of our Alaska Native
    leaders. Byron Mallot is back there. We have Julie Kitka from
    AFN; Nelson Angapak back there; Ralph Anderson; Zack Brink,
    thank you.
        This legislation, introduced by Senator Stevens, really
    builds on the best practices of the international economic
    development and the successful principles of tribal self-
    determination here in the United States. I want to thank you,
    Senator Stevens, for introducing this legislation and for your
    continued commitment to the Native people of Alaska.
        I also want to recognize the very diligent work of Alaska
    Federation of Natives, AFN, in changing the economic landscape
    in rural Alaska and mapping the economic future of the Native
    people by merging culture and merging development. We know that
    the ingenuity of the Alaska Native people has enabled them to
    not only survive, but to thrive for centuries in one of the
    harshest, most unforgiving environments. It is that ingenuity
    that will enable them to strive into the future in their effort
    to harness the private market, to raise the standard of living
    and the social well being of rural Alaska.
        I appreciate the recognition and the importance that AFN
    has placed on sustaining the cultures of the Alaska Native
    people, in their effort to apply proven models of economic
    development. We know that this diligence to provide new
    opportunities for the future of generations of rural Alaskans
    will make that difference.
        AFN has done some very innovative things. We have engaged
    world-renowned economists such as Hernando DeSoto, and the
    larger international economic development community, to think
    about the economic realities that our rural residents face. The
    leadership forums that AFN has hosted in 2004 and 2006 have
    been pivotal in building relationships between rural Alaska and
    the global community such as the World Bank. It is these forums
    that enable them to share the ideas, the methods and practices
    of integrating indigenous peoples into the market economy, of
    realizing indigenous development potential, and of recognizing
    the importance of local cultures.
        The Alaska Marketplace is a great example of a success
    which integrates culture and development in a competition of
    business ideas, bringing together rural entrepreneurs with
    technical experts and financiers to bring the development ideas
    of the entrepreneurs into life. When you sit down and you talk
    to them, a lot of these are young people with great ideas, who
    need just a little bit of that financial backing to kick-start
    an idea that is going to make a difference within their
    community.
        I truly appreciate all that Senator Stevens has done in
    cultivating all of this activity through the legislation that
    we have before us today. Whether it is the Alaska Marketplace,
    the developments that we are seeing invigorate this
    entrepreneurial spirit in rural Alaska, making it more
    investor-friendly, forging a new path in economic development
    in our Native communities.
        I am looking forward to the testimony that we will hear
    this morning, and encouraging this important legislation to
    move forward.
        With that, Mr. Chairman, I thank you for your time here
    this morning. I know that you have other commitments, but I am
    glad that you will be able to hear at least a portion of what
    we have this morning.
        The Chairman. Senator Murkowski, thank you very much.
        Senator Inouye?

                  STATEMENT OF HON. DANIEL K. INOUYE,
                        U.S. SENATOR FROM HAWAII

        Senator Inouye. Thank you, Mr. Chairman.
        I commend the Committee for holding this important hearing,
    and I wish to commend my friend and colleague, Senator Stevens,
    for authoring this bill. This bill will play an important role
    in reviving the economies of many of our Native communities.
        I ask that the full statement be made part of the record.
        The Chairman. Without objection.
        [The prepared statement of Senator Inouye follows:]

     Prepared Statement of Hon. Daniel K. Inouye, U.S. Senator from Hawaii
        Thank you Mr. Chairman. I commend the Committee for holding this
    important hearing on S. 2232. I wish to commend my colleague and friend
    Senator Stevens for authoring this legislation. This bill will play an
    important role in reviving the dire economies of many of our Native
    communities.
        Many of our Native communities continue to suffer from
    disproportionately high rates of unemployment, poverty, substandard
    living conditions, and poor health. This legislation has been developed
    to remedy some of the disparities mentioned earlier by creating long-
    term jobs, revenue opportunities, and an investment favorable climate
    which would in turn increase Native productivity in some of the poorest
    Alaska Native, Native Hawaiian, and Native American communities.
        I believe that this legislation will not only provide a wealth of
    opportunities but I have always said that one day native peoples will
    have to find other means to sustain themselves. Over the years, I have
    personally witnessed the Indian Gaming Industry grow into a multi-
    billion dollar industry. It has proven to be one of the most successful
    economic development tools for Indian Country. Over 200 tribes have
    taken advantage of this thriving economic opportunity to provide funds
    for government operations, and social programs.
        Although gaming has proved to be a success for some tribes it is
    not a solution for every community.
        As a cosponsor of this legislation, I would like to urge my
    colleagues to support this legislation and look forward to working with
    them on this initiative. Once again I thank you Mr. Chairman for
    holding this important hearing.

        The Chairman. Senator Stevens, thank you for joining us
    this morning. We will recognize you and you may proceed.

                    STATEMENT OF HON. TED STEVENS,
                        U.S. SENATOR FROM ALASKA

        Senator Stevens. Thank you very much, Mr. Chairman.
        I follow my good friend and colleague, and we have another
    hearing, so I would ask that my statement be printed in full in
    the record, as you indicated.
        Mr. Chairman, I would hope that this bill might stimulate
    another visit to Alaska by this Committee. It has been a long
    time. I really believe that those who deal with Indian affairs
    primarily in the South 48 have to get a grasp of the problems
    that our people in Alaska face with regard to economic
    development.
        We have 241 villages spread throughout an area that is one-
    fifth the size of the United States. The principal area of the
    northwest is larger than Texas, and it has scattered villages
    there. These villages can be reached year round only by air.
    Seventy percent, as a matter of fact, of all the cities and
    villages of the State can be reached year round only by air.
    They have some summertime boat supply, but basically their
    transportation is by air.
        We have an isolation that is just absolutely unheard of,
    really, in terms of the total Indian affairs of the Country.
    Most Indians in the South 48, and I had some experience with
    them back when I was in the Interior Department, are in areas
    where they are fairly contiguous. Our people are spread out so
    much that any economic development is very difficult to
    maintain.
        You may recall that in the Alaska Native Claims Settlement
    Act, Section VII(I), which requires that if any regional
    corporation received monies from resource development, they had
    to share 70 percent of that with the other regions in the
    State. There were 12 regions in the State. We tried to find a
    way to broaden opportunity that came from resource development.
    That has proven helpful, but it hasn't really gotten down to
    the village level.
        I want to give really great credit to Julie Kitka,
    President of the Alaska Federation of Natives, for suggesting
    that we go this direction and look to the Millennium Challenge
    as an example of what can be done if our Federal Government
    puts its mind to finding a way to assist people in very rural
    areas to achieve some economic development, and achieve it and
    maintain it.
        The difficulties of the past have primarily been we have
    had spot programs that have come in and helped individual
    villages, but we have not been able to sustain that because of
    transportation and communications problems. Now, if you can
    bring the Committee to the State, and I really do urge it. We
    have made arrangements that the National Guard will take you
    throughout the State, and really have a chance to visit these
    areas and see the differences between them.
        But the real problem is the sustainability of this kind of
    development. In the past, it was really improbable. We could
    not tell you it could be done. But today, because of
    telecommunication and the expansion now of broadband to these
    areas, they have opportunities that we have never thought of
    before.
        There is no reason why Hyatt, for instance, should have
    people answering their phones in India. They could very easily
    be answered in our villages or some of the Indian reservations
    in the U.S. We have to find some way to give an incentive to
    bring some of these jobs back home.
        The reason that they went to India, of course, was their
    nation subsidized the establishment of enormous phone banks.
    Now, with the advent of new types of communication, we can beat
    that very easily, provided we have the incentive to have these
    jobs come home.
        I think this Committee in particular has the toughest job
    of any in terms of trying to bring about economic development,
    because of the isolation of our people and because of the lack
    of development on the Indian reservations in the South 48.
        I hope that this will be an example. If we can get this
    bill passed, it would show what can be done if the Federal
    Government decides to combine the efforts of all the agencies
    and try to bring about and sustain economic development in
    areas where people currently think it is not possible.
        So again, I thank you very much for holding the hearing. I
    do hope that my colleague from Hawaii, and by the way, they
    have a similar situation. If you look at Hawaii, Hawaii's outer
    islands really make Hawaii larger than our State. We have half
    the coastline of the United States, but they have this enormous
    bank of islands out there with the indigenous people still
    living there. They, too, have a problem, and they need a
    challenge. There is no reason why this bill can't be expanded
    in the first instance to include Hawaii, if that is your desire
    to do so. It would make a lot of sense, because with the advent
    of new communications, not telecommunications, but really total
    communications, a communications-based economy in these areas
    where they have many people.
        By the way, our students out there are computer literate at
    the age of eight. We have the highest penetration of computer
    literacy in the Country. Out there in those areas, those
    schools are teaching children how to use the new systems that
    many people of the South 48 are not using. At a very young age,
    they are into computer development, into internet access, and
    they can find jobs related to the new kind of economy, the
    internet economy, if we work to make it happen.
        So I thank you for the hearing. I hope you will think about
    coming up. We can find some very nice times to come up. These
    people can show you some of the best fishing in the world and
    other things, too. One time in the past, we took the whole
    Appropriations Committee to Alaska, and it was a very
    enlightening trip. I think that those who went along, there
    were 14 who went along, and went throughout the State and they
    learned a great deal, and they in years after that were very
    receptive to some of the ideas we had about trying to help
    Alaska per se.
        I make the same suggestion to this Committee in terms of
    trying to look at these villages and see what this plan means
    to those villages if it properly implemented.
        So I do thank you for your time. We have a lot of good
    friends here in the audience who are going to testify. I wish
    we could stay, but Senator Inouye and I have to have our own
    committee. We have revolving chairs, you know, so he is
    Chairman now.
        Thank you very much.
        [The prepared statement of Senator Stevens follows:]

                    Prepared Statement of Hon. Ted Stevens,
                            U.S. Senator from Alaska
        I'm pleased to be here this morning to offer my support for the
    bill before your Committee today--S. 2232, the ``Foreign Aid Lessons
    for Domestic Assistance Act of 2007.'' I introduced this bill, along
    with you and Senators Inouye and Akaka, in the Senate in October 2007.
        Welcome to our Alaska friends who are here today to testify on
    behalf of this legislation--Julie Kitka, President of the Alaska
    Federation of Natives, Zack Brink, President of the Association of
    Village Council Presidents and Ralph Anderson, Executive Director of
    the Bristol Bay Native Association, and other Alaska Natives here today
    to offer support.
        First, Madame Chairwoman, congratulations to you and Chairman
    Dorgan on securing passage--after 10 years of efforts--of the
    reauthorization of the Indian Health Care Improvement Act yesterday on
    the Senate floor. It contains provisions that will benefit all Alaska
    Natives and American Indians. I am a cosponsor of that important
    legislation, and I look forward to its speedy consideration by the
    House and signing by the President.
        Today, however, your Committee turns its attention to another area
    of critical importance to the well-being of American Indians, Alaska
    Natives and Native Hawaiians--economic success and independence.
        Despite modest improvements in the economic and social
    circumstances of American Indians, Alaska Natives and Native Hawaiians,
    they continue to have extremely high rates of unemployment and poverty,
    poor health, substandard housing and the related ills of alcohol and
    drug abuse. Native people have vibrant cultural legacies and abundant
    natural resources on and under their lands and in their waters. Many
    Native communities have marketable timber, huge reserves of coal,
    natural gas, oil, fish and shellfish and other natural amenities.
        At the same time, Native economies are hobbled by geographic
    remoteness, distance from markets and population centers, poor physical
    infrastructure, and a lack of governmental transparency contributing to
    stagnating Native American economies.
        Because Native economies are often plagued by the same challenges
    as the economies of the developing world, Native economies are likely
    to benefit from the application of proven models employed in
    international development efforts, most notable the Millennium
    Challenge Act of 2003. This initiative aims to foster those policies
    that are known to be effective and reduce poverty and promote
    sustainable economic growth in the host country. Typically, the
    activities that are assisted are related to agriculture, irrigation,
    and related land practices, physical infrastructure development to
    facilitate marketing of goods and services, and a variety of health
    care programs.
        Similarly, the objectives of the legislation before your Committee
    today are just as straightforward: enhancing the long term job creation
    and revenue generation potential of Native economies by creating
    investment-favorable climates and increasing Native productivity.
        The Foreign Aid Lessons for Domestic Economic Assistance Act will
    also authorize administering federal economic development assistance by
    encouraging the integration and coordination of such assistance to
    benefit Native economies. To do that, the bill requires that any
    assistance provided must be coordinated with other federal economic
    development assistance programs for Native Americans.
        Madame Chairwoman, I hope your Committee will look favorable on
    this legislation and work for its passage during this Congress. Our
    Native people are looking to us for this much needed assistance to gain
    economic self-sufficiency and a share of the prosperity that so many
    others in our nation already enjoy. Thank you for the opportunity to
    speak on its behalf today.

        The Chairman. Senator Stevens, thank you very much for
    being here today and providing testimony on a new and
    interesting idea. We appreciate the work of you and Senator
    Inouye. We will let you go, and we have other witnesses that we
    will then call to the dais.
        We are going to have two panels today. The first will be
    Mr. Matt Crow, who is the Deputy Assistant Secretary for
    External Affairs and Communications, Economic Development
    Administration, U.S. Department of Commerce in Washington, D.C.
        Following Mr. Crow, we will have Ms. Julie Kitka, President
    of the Alaska Federation of Natives; Mr. Ralph Anderson,
    President of Bristol Bay Native Association; Mr. Zack Brink,
    Vice President of the Association of Village Council
    Presidents; and Mr. Paul Applegarth, the CEO of Value
    Enhancement International.
        We will introduce them at greater length, but in the
    meantime, Mr. Crow, thank you very much for being with us from
    the Economic Development Administration. Your entire statement
    will be made a part of the permanent record, and we would ask
    that you summarize. Thank you very much.

              STATEMENT OF MATTHEW CROW, DEPUTY ASSISTANT

           SECRETARY FOR EXTERNAL AFFAIRS AND COMMUNICATIONS,

        ECONOMIC DEVELOPMENT ADMINISTRATION, U.S. DEPARTMENT OF
                                COMMERCE

        Mr. Crow. Thank you, Mr. Chairman and Vice Chairman
    Murkowski, members of the Committee.
        I am honored to be here today representing the Department
    of Commerce. I am also pleased to be here at the same hearing
    as Julie Kitka. I have known Julie since I came to work at the
    Commerce Department, and on my visits to Alaska. She has been a
    great friend and a great source of advise and counsel to the
    Department of Commerce and to the Bush Administration as well.
        I appreciate the opportunity to discuss with the Committee
    the Foreign Aid Lessons for Domestic Economic Assistance Act of
    2007. While the Administration hasn't taken a position on the
    bill, the Department is pleased to offer its observations today
    based on our experience working with Native American
    communities.
        Overall, the Department appreciates the bill's emphasis on
    planning to promote successful economic development and the
    effort to incorporate performance benchmarks in order to better
    ensure results are achieved in areas where economic development
    opportunity lags.
        The Commerce Department has promoted economic growth in
    Native American communities in the following ways. The
    International Trade Administration, ITA, their Commercial
    Service at the Department, plays a key role in promoting Native
    American exports abroad. Since 2004, the Commercial Service has
    helped its growing base of Native American businesses to
    achieve approximately $1 million in export sales in
    international tourism in tribal lands. The Commercial Service
    has provided research on target markets for Native American
    artisan work, funded activities at international industry trade
    shows, and presented training seminars for Native American
    communities on marketing their Native trade crafts and their
    lands as travel destinations across the world.
        EDA, my agency, makes investments to promote economic
    development in Native American communities. Native American
    communities are eligible to compete for EDA investments and
    can, by statute, receive up to 100 percent Federal funding for
    their economic development initiatives.
        Since 2001, EDA has made over 500 investments in Native
    American communities and organizations for economic
    development, totaling over $88 million. These investments are
    estimated to have created over 9,000 jobs for Native Americans,
    saved another 6,500 jobs, and leveraged over $395 million in
    private sector investment.
        Each year, EDA awards approximately 55 planning
    investments, totaling $2.5 million to Native American
    governments to help with the creation of comprehensive economic
    development strategies, CEDS plans. EDA expects to maintain
    this level of investment in 2008. By drafting economic
    development strategies that reflect local priorities, Native
    American governments position themselves to direct their
    resources to optimal use.
        EDA has four policy priorities that guide our investment
    philosophy. We look for investment opportunities that promote
    innovation and competitiveness, entrepreneurship, regional
    collaboration, which is key the rural areas that Senator
    Stevens referred to, and connecting those regional economies to
    the worldwide marketplace. These four cornerstones of EDA's
    approach have been successful in creating higher skilled,
    higher wage jobs, attracting private investment, and preparing
    America's regions for success in the 21st century.
        In selecting projects for investment, both for distressed
    Native American communities as well as other distressed areas,
    EDA relies on grassroots ideas. As an example of EDA's
    investments in Native American Indian communities, let me tell
    you about one of our more fruitful partnerships. In Qwinhagak,
    near Bethel, Alaska, EDA invested $1.2 million to extend the
    runway 800 feet to accommodate aircraft handling bigger
    payloads. This successful investment generated almost 200 new
    higher skill, higher wage jobs and is positioned to facilitate
    the shipment of cargo between remote Alaska areas and
    Anchorage, which benefits a whole region of Alaska, not just
    the local village.
        The Foreign Aid Lessons for Domestic Economic Assistance
    Act of 2007 correctly identifies the fundamental need to begin
    any economic development with strategies designed to achieve
    sustainable growth and reduce poverty over a defined period.
    The bill intends to mirror the framework established by the
    Millennium Challenge Act, which improves how the U.S. provides
    foreign aid to underdeveloped countries. If this demonstration
    project follows the Millennium Challenge Act model, it is
    critically important Native American communities be able to
    show development readiness by the improvement of schools and
    education levels, elimination of regulatory barriers to
    business creation, and a reduction overall in violent crime.
        In addition, the bill recognizes the critical need to
    measure actual results. Equally significant, it recognizes that
    accountability in the implementation of such projects is an
    important incentive for success. Accordingly, it authorizes the
    Secretary to suspend or terminate assistance for poor
    performance, so resources can be redirected to more promising
    initiatives.
        I also appreciate the intent of the bill to simplify the
    complex maze of often confusing regulatory requirements that
    Native American areas face in accessing assistance from a
    myriad of Federal programs. The demonstration bill, S. 2232,
    proposes to provide Native American communities with a multi-
    year strategic economic development plan developed by the
    community, and pushes the major decision-making to the local
    level. This is an important first step to a successful outcome,
    as is the provision of technical assistance to support capacity
    building, which a number of communities are likely to need.
        We appreciate the intent of this bill to adapt the
    framework of the Millennium Challenge to Native American
    communities. We look forward to working with Chairman Dorgan
    and Vice Chairman Murkowski to bring our experience in economic
    development to bear in Native American communities.
        Thank you for your time, and the Commerce Department looks
    forward to being helpful as this bill moves through Congress.
        [The prepared statement of Mr. Crow follows:]

      Prepared Statement of Matthew Crow, Deputy Assistant Secretary for
           External Affairs and Communications, Economic Development
                  Administration, U.S. Department of Commerce
    Introduction
        Chairman Dorgan, Vice Chairman Murkowski, and Members of the
    Committee, I am honored to be here today representing the Department of
    Commerce. I am also pleased to be at the same hearing as Julie Kitka,
    President of the Alaska Federation of Natives. The Department of
    Commerce knows Ms. Kitka well, and we have come to greatly appreciate
    her passion, commitment, and new ideas regarding improving economic
    opportunity in Native American communities.
        I appreciate the opportunity to discuss with the Committee the
    ``Foreign Aid Lessons for Domestic Economic Assistance Act of 2007.''
    Although the Administration has not taken a position on the bill, in
    this tight fiscal environment, it is clear that spending constraint is
    one of the Administration's top priorities. However, the Department is
    pleased to offer its observations today, based on our experience
    working with Native American communities. Overall, the Department
    appreciates the bill's emphasis on planning to promote successful
    economic development, and the effort to incorporate performance
    benchmarks in order to better ensure results are achieved for areas
    where economic opportunity lags.
    Department of Commerce Experience with Native American Communities
        The Department of Commerce has promoted economic growth in Native
    American communities in the following ways:
    International Trade Administration Promotes Exports and Tourism
        The International Trade Administration's Commercial Service plays a
    key role in promoting Native American exports abroad. Since 2004, the
    Commercial Service has helped its growing base of Native American
    businesses to achieve approximately $975,000 in export sales and
    international tourism in tribal lands. The Commercial Service has
    provided research on target markets for Native American artisan work,
    funded activities at international industry trade shows, and presented
    training seminars for Native American communities on marketing their
    native crafts and their lands as travel destinations.
    Economic Development Administration Invests in Job Creation
        The Department of Commerce's Economic Development Administration
    (EDA) makes investments to promote economic development in Native
    American communities. Native American communities are eligible to
    compete for EDA investments, and can by statute receive up to one
    hundred per cent federal funding of their economic development
    initiatives.
        Since 2001, the Economic Development Administration (EDA) has made
    509 strategic investments to Native American communities and
    organizations for economic development, totaling over $88 million. It
    is estimated that these investments will have created over 9,400 jobs
    for Native Americans, saved another 6,500 jobs, and leveraged over $395
    million in private sector investment over the lifecycle of the
    projects.
        Each year, EDA awards approximately 55 planning investments
    totaling $2.6 million to Native American governments to help with the
    creation of comprehensive economic development strategies, and EDA
    expects to maintain this level of investment in 2008. By crafting
    economic development strategies that reflect local priorities, Native
    American governments position themselves to direct their resources to
    optimal use.
        EDA has four policy priorities that guide its investment
    philosophy; we look for projects that promote:

       innovation and competitiveness,
       entrepreneurship,
       regional collaboration, and
       connection to the worldwide market.

        These four cornerstones of EDA's approach have been successful in
    creating higher-skilled, higher-wage jobs, attracting private
    investment and preparing America's regions for success in the 21st
    century.
        In selecting projects for investment, both for distressed Native
    American communities as well as other distressed areas, EDA relies on
    grassroots ideas. When economic development strategies are developed by
    local decision makers, the whole process works better.
        As example of EDA's investments in Native American and Indian
    communities, allow me to review one of EDA's more fruitful
    partnerships:
    Native Village of Kwinhagak
        In 2004, EDA made an investment in the Native Village of Kwinhagak
    near Bethel, Alaska. EDA invested $1.2 million to extend the airport
    runway 800 feet to accommodate planes handling bigger payloads. This
    successful investment generated 189 jobs. The runway is strategically
    located to ship cargo to remote wilderness in southwest Alaska and to
    Anchorage. Therefore, this runway extension benefits a whole region,
    not just a locality.
    S. 2232
        The ``Foreign Aid Lessons for Domestic Economic Assistance Act of
    2007'' (S. 2232), proposes to base assistance to Native American
    communities upon a multi-year strategic economic development plan
    developed by the community. This is an important first step to any
    successful economic plan. The bill intends to mirror the framework
    established by the Millennium Challenge Act, which improves how the
    U.S. provides foreign aid to under-developed countries. Under this
    model, communities receiving assistance would need to show development
    readiness by the improvement of schools and education levels;
    elimination of regulatory barriers to business creation; and a
    reduction in violent crime. The bill recognizes the critical need to
    measure actual results and that accountability in the implementation of
    such projects is an important incentive for success.
        While these are positive features, we have some concerns with the
    proposal. The authorized program of $20 million per year, for example,
    would be inconsistent with the President's 2009 Budget.
        We have also been informed that the Justice Department has concerns
    about the definition of ``eligible entity'' in section 3 of the bill.
    Since Congress has not recognized any group of Native Hawaiians as an
    Indian tribe and there is a substantial, unresolved question whether
    Congress may treat the native Hawaiians as it does the Indian tribes, I
    understand that Justice recommends that Native Hawaiian community
    organizations be deleted from the list of eligible entities.
        There is also concern over other agencies transferring development
    funds to the Department of Commerce. We would, of course, need to
    discuss such arrangements with our sister agencies.
    Conclusion
        We appreciate the intent of this bill to adapt the framework of the
    Millennium Challenge to Native American communities. While there are no
    Department of Commerce funds available for this program, we look
    forward to working with Chairman Dorgan, Vice Chairman Murkowski and
    the Committee, to bring our experience in economic development to bear
    in helping Native American communities prosper.
        Mr. Chairman, Vice Chairman Murkowski, and Members of the
    Committee, thank you for your time and we look forward to being helpful
    as this bill moves through the Congress.

        The Chairman. Mr. Crow, thank you very much for your
    testimony.
        Let me ask a couple of questions. Is it your feeling that
    this proposal duplicates any other program that exists to
    provide stimulus or help?
        Mr. Crow. No. If you go back to a couple of years ago,
    there was an idea that unfortunately was strangled in its crib
    by different groups, called the Strengthening America's
    Communities Initiative. It was a similar idea, to take all the
    economic development plans across the government, which there
    are approximately 15 different agencies involved in economic
    development, and combine them under one roof. Unfortunately,
    that didn't see the light of day several years ago. So the
    answer to your question is no.
        The Chairman. But this is being offered because there is a
    feeling that there needs to be something more. You seem to feel
    like the Administration does not support this or has concerns
    about it. If there is a general feeling there needs to be
    something more and this is not it, what is the Administration
    recommending?
        Mr. Crow. To the degree that they want to see a greater
    coalescing of the economic development plans across the
    spectrum of Federal agencies, they support the bill. The
    funding measures that would have to come over to the Commerce
    Department, as delineated in the bill, will have to be
    discussed with our sister agencies, but I don't think you are
    going to find anybody in the Bush Administration who is going
    to argue that this would be a much more efficient way to
    deliver economic development aid to Native American
    communities.
        The Chairman. And would you see, as you have reviewed this
    bill, it applies to Alaska Natives, Hawaiian indigenous people,
    as well as Native Americans in the lower 48 States?
        Mr. Crow. Yes.
        The Chairman. Senator Murkowski?
        Senator Murkowski. Well, to follow on Senator Dorgan's
    question then, is it just the money? In your written testimony,
    when you cite to the concerns, you first reference the
    authorized amount of $20 million per year as being inconsistent
    with the President's budget. Then you just referenced the
    difficulty in kind of transferring to the Department of
    Commerce from other agencies. Is that the biggest hurdle, in
    your opinion?
        Mr. Crow. It has been historically because each of those
    Cabinet offices and agencies have their own appropriators and
    their authorizors. As you know, everybody gets very nervous in
    Washington when you start talking about moving large sums of
    money and different responsibilities for different agencies
    under one roof. In my estimation, that was one of the greatest
    hurdles that the Strengthening America's Communities initiative
    had.
        Senator Murkowski. You are obviously within Commerce. We
    know that in the State of Alaska, EDA does great things,
    whether it is the runway that you cite in Kwinhagak, or the
    various other EDA projects. We recognize that it makes a
    difference. But it is also just one small pocket of money, if
    you will. So often, the challenge is how do you marry that up
    with anything that is going to complete the project? Where do
    you go? It is kind of shopping from agency to agency to build a
    project that, as you know, kills a lot of projects.
        Mr. Crow. You put your finger on a huge problem, not only
    in rural Alaska, but also across the United States. For a rural
    community or a collection of rural communities from a regional
    standpoint to come together to shop all the different baskets
    of Federal economic development funding is a long and tedious
    process. It is a huge challenge for them. They almost have to
    hire somebody singularly on salary just to do that, and they
    don't have the resources to do that.
        So in essence, they have to go around and cherry-pick all
    these different agencies like HUD, AG, Education, Commerce. It
    is a terrible burden on them.
        So I agree with you 100 percent. One of the greatest
    challenges of recognizing where the resources are in the
    Federal Government is finding them out in the first place and
    then trying to figure out what you are eligible for. There is
    no central control point. There is no one office you can go to
    to clear all that through.
        I am not advocating having that one central office dictate
    economic development policy. Far from it. We want to keep that
    at the local level, but it would be a huge advantage for rural
    communities to be able to go to one central location to find
    out what the resources are.
        Senator Murkowski. So in your opinion, then, what is being
    proposed through Senator Stevens' legislation is something that
    makes sense.
        Mr. Crow. It is. Yes.
        Senator Murkowski. From an efficiency perspective and from
    the perspective of being able to accomplish what we are looking
    for, which is economic development in, at this point,
    economically distressed villages in Alaska or otherwise.
        Mr. Crow. And from a performance management standpoint, a
    performance review standpoint, with the concerns that OMB would
    have and the GPRA measures, we think it would be far easier to
    track.
        Senator Murkowski. Well, I like your comments because they
    are positive. I get concerned recognizing that the hurdle of
    getting the commitment from other agencies to participate and
    work in a cooperative manner toward something like this is
    probably a bigger struggle. That I find discouraging, because I
    think we have to look beyond the typical framework that we face
    within government right now because what we are doing is we are
    putting up roadblocks to economic development. Whether it is in
    Alaska Native villages or on reservations or for Native
    Hawaiians, we are not able to advance what we know we need to
    do.
        So at some point in time, there has got to be greater
    coordination and a greater acceptance that we are going to have
    to change how we are approaching this problem.
        Where do you suggest we start?
        Mr. Crow. Well, to your point, I have never met a grant
    recipient or a potential grant recipient that cared or
    particularly wanted to care one way or the other about internal
    machinations back here in Washington, about the turf battles
    with different agencies and funding. They just have great
    ideas. They have innovative ideas that they want to use to grow
    jobs, and they are looking for the priming of their economic
    pump.
        I wish EDA could do more. We do as much as we can, but I
    agree with you completely that we owe it to the customers and
    to the taxpayers in these rural areas to make the delivery
    mechanisms, and the ability to deliver the Federal money. We
    are not talking about just giving the money to them. Most of
    these funds are matching funds. Most communities, particularly
    in Alaska, show terrific leadership. They show buy-in from the
    private sector. They show buy-in from the rural communities'
    leadership. They show buy-in from the economic development
    professionals like Julie.
        We need to make it easier for them, not harder for them, to
    deliver the economic development help that they need. Because
    the ideas are there, the resources are there, but the ability
    for them to climb through the maze of all the economic
    development funding mechanisms in the Federal Government, it
    shouldn't be their problem in the first place, but it is.
        Senator Murkowski. Do you have anything specific within EDA
    or the Department of Commerce that you feel has been successful
    in retooling economic development within Alaska Native
    communities?
        Mr. Crow. I think I would have to point singularly to our
    work with the Department of Labor on workforce development
    issues. We have found that helping the Labor Department, and
    this is a good example of two Departments actually working
    together for the common good, they have identified areas in
    rural Alaska which have a workforce development problem. In
    other words, there are manufacturing jobs there, but there are
    not the skill sets for the people to come and work at the
    plants. On manufacturing sites, Labor has identified those. We
    have worked with Labor in those communities to develop
    workforce training sites.
        So we take a gentleman who is making $12,000 or $13,000 a
    year as a dishwasher and turn him into a $65,000 a year x-ray
    technician at a manufacturing plant. Those are the kinds of
    jobs we create. We are in the job business, but we are not in
    the low paying job business. We want to create higher paying
    jobs.
        So I point to working with the Labor Department and their
    WIRED initiative.
        Senator Murkowski. Why has that been more successful?
        Mr. Crow. I think it combines two agencies who singularly
    don't have the expertise, but together they have great
    expertise. So we take the Commerce Department with their
    ability with economic development in international trade, and
    you take the Labor Department who knows how to train people
    with their funds as well, with some of their budget. So I think
    you have a marriage there of two fairly efficient, well-managed
    Cabinet agencies pulling together and we are actually creating
    jobs a little bit faster than we used to in the past when we
    operated independently of each other. Up until 2002, there
    wasn't a heck of a lot of communication between the Labor
    Department and the Commerce Department.
        Senator Murkowski. What do you figure the biggest
    impediment is to meaningful economic development within Alaska
    Native villages right now? Is it dealing with the bureaucracy
    that we have put up for them?
        Mr. Crow. I think it is partly that. I think it is
    infrastructure. I think it is getting the water, getting the
    sewer, getting the power, the broadband to these regions. It is
    giving them the ability to identify the resources to work
    together to learn what works in other rural communities in the
    United States. While there are unique challenges to Alaska,
    there are tremendous success stories from a rural perspective
    in the Lower 48. If we could somehow combine the best practices
    and methods which we see in the Lower 48 with attempts in
    Hawaii and Alaska, I think that would really benefit the
    customers and the taxpayer.
        Senator Murkowski. Do you have any good ideas about how to
    do that?
        Mr. Crow. I would like to see some sort of a national
    organization which could gather together best practices and
    methods from rural communities across the United States, to
    exchange ideas for people like Julie and people who are here
    today from their communities, to come to this organization on a
    regular basis to learn from the success stories of the other
    rural communities, because by information sharing, you are not
    going to get that at national conferences and through brochures
    and through the Internet. You have to actually talk to
    practitioners. You have to talk to the people in those
    communities. That is an idea that I have absolutely no money to
    fund, or know where I would get it from.
        Senator Murkowski. Well, it is something that we have
    talked about, too. Oftentimes here in the Committee, we hear
    all the bad statistics about what is facing Alaska Natives and
    American Indians around the Country, whether it is in the
    health care area or whether it is the shortage of housing or
    the substandard housing. We hear all of the negatives. We need
    to remember that there are a lot of good things that are
    happening out in Indian Country.
        But what is the forum for sharing best practices? What is
    the forum where you can sit down with one another and learn
    from the successes or perhaps the failures that have ultimately
    yielded success so that we don't have to start over in every
    reservation in every village with these new ideas.
        I don't know, Mr. Chairman, how we accommodate that at the
    Committee level, but it would sure be nice to have a focus on
    the good news instead of always the negative. So I appreciate
    your suggestions, Mr. Crow. I appreciate your testimony this
    morning and for your willingness to work with Julie, AFN and so
    many of our leaders on this issue.
        The Chairman. Mr. Crow, thank you very much for being with
    us today. We appreciate your attendance and your testimony is
    very helpful.
        Next, we will ask for the second panel to come forward: Ms.
    Julie Kitka, the President of the Alaska Federation of Natives;
    Mr. Ralph Anderson, the President and CEO of Bristol Bay Native
    Association; Mr. Zack Brink, Vice President of the Association
    of Village Council Presidents; and Mr. Paul Applegarth, CEO of
    Value Enhancement International and former CEO of the
    Millennium Challenge Corporation.
        As I indicated previously, I am also a member of the same
    Defense Appropriations Subcommittee that Senator Stevens and
    Senator Inouye had to leave to attend, so I will have to go to
    that subcommittee, and Senator Murkowski will chair the
    remainder of the hearing.
        I want to thank the witnesses especially for being with us
    today. We will begin with Ms. Kitka.
        I would say to all of you that your full statements will be
    made a part of the permanent Committee record and we would ask
    that you summarize.

              STATEMENT OF JULIE KITKA, PRESIDENT, ALASKA
        FEDERATION OF NATIVES; ACCOMPANIED BY BYRON I. MALLOT,
                     DIRECTOR, SEALASKA CORPORATION

        Ms. Kitka. Thank you, Mr. Chairman, Madam Vice Chairman.
        On behalf of the Alaska Federation of Natives, I really
    appreciate your scheduling time for the hearing. We support the
    Senate bill that is before you. We urge that there might be a
    couple of technical amendments to the Senate bill that we might
    want to do, and we would be glad to get that to your staff.
        But overall, what we want to convey to the Committee is our
    excitement in working on creating economic opportunities for
    our communities, our excitement in working on national
    demonstration projects with our brothers and sisters, and our
    intense interest in focusing on rural America and what
    additional things need to be put into place for Native
    Americans that live in remote rural areas on that, because the
    challenges sometimes are different than ones that are more
    urban.
        In addition to this bill, which we fully support and are
    very excited about, we really would urge that a national
    priority for high-speed telecommunications be made a priority
    for this Committee. In order for us to participate in the
    global economy, and we are part of the global economy,
    everywhere you look around us we are part of that already, we
    need to have access to the high-speed telecommunications.
        We also really need the investment climate in our
    communities changed. We need tax policies and investment
    policies that incentivize economic empowerment of or people.
    And we need authorization language and funding for what we call
    clusters of economic initiatives. This bill is very important
    because it will move us forward as Native people all over the
    Country in the areas where the demonstration project is,
    whether or not the U.S. economy is very robust and growing in
    leaps and bounds, or whether or not we are in recession. It is
    that core of an initiative that will help us in either
    situation where the economy is at.
        We also realize that it is one piece of the economic puzzle
    in considering and encouraging a whole look at economic
    initiatives like the cluster approach and demonstration
    projects. We really cannot underestimate how important that is
    in our view. We would like to let the Committee know that we
    would like to bring forward a couple of additional
    demonstration projects for consideration of the Committee, one
    in telecommunications and communications strategies of areas
    that we think can go forward, but also demonstrations in regard
    to compacting energy resources and new technology components on
    that. So with the permission of the Committee on that, we would
    like to bring that forward within the next 30 to 60 days,
    actual concrete proposals and ideas on that. Again, we think
    that the cluster approach is the way to go.
        We have also been focusing a lot on how do Native people,
    how do we become competitive in the economy? How do we be
    competitive in our State, in our Nation, and globally? We do
    think that we need additional tools to help us be more
    competitive, and we think that we have to go things more
    efficiently and more strategically and with much more foresight
    in what we are doing. Again, we believe that this legislation
    that is pending in front of you will help us in the areas where
    we are doing the demonstration, but if we are able to prove
    that successful, we sure like it ramped up. We have other areas
    in our State, other areas in the Country that would like to
    participate in the demonstration project, but we need to be
    prepared to ramp up and scale up some of these initiatives very
    quickly if we are able to prove that they make a lot of sense.
        Again, I am not going to rehash what is in the legislation
    with the written testimony. We strongly support it. We think it
    is very innovative. We think that it will has lasting results.
    And most importantly, it will be helpful to us as Native people
    regardless of where the U.S. economy is at. That is really
    significant when you see the changes that are going on and how
    people that basically are at the bottom of the economic sphere
    are impacted so much by changes in the U.S. economy, to know
    that this legislation and this tool will help us regardless of
    that. I think that is really significant.
        So with that, I would just ask that my written testimony be
    included in the record, and thank you very much for the
    leadership shown in the Committee and your support on this
    legislation.
        [The prepared statement of Ms. Kitka follows:]

      Prepared Statement of Julie Kitka, President, Alaska Federation of
                                    Natives
        Good morning, Mr.Chairman, Vice Chair Murkowski and distinguished
    members of the Committee. Thank you for the opportunity to appear
    before you today on behalf of the Alaska Federation of Natives (AFN),
    to express our views on S. 2232. If enacted, this legislation will
    bring a welcomed new approach to stimulating Alaska Native, Native
    Hawaiian and Lower-48 Indian tribal economies. We strongly urge its
    passage during this Congress.
        My name is Julie Kitka. I am President of the Alaska Federation of
    Natives, Inc.; I am pleased to appear here today in support of this
    innovative and critically important legislation.
        By way of background, AFN is the largest statewide Native
    organization in Alaska, representing more than 130,000 Alaska Natives.
    We are a young, growing population, expected to double in size every 23
    years, so our need for a solid economic base is critical. The Alaska
    Native population, although united in AFN, is a very diverse group.
    There are at least eight distinct cultural and ethnic groups: Yupik,
    Cupik, and Inupiat Eskimo peoples; Athabascan, Tlingit, Haida and
    Tsimshian Indian peoples; and Aleuts. Our Native cultures are land-
    based, and our occupation and use of our land predates Plymouth Rock
    and the pyramids. Within each cultural group, there is diversity--
    across generations, across geography, and across gender. Because of
    this great diversity, there is no ``one solution fits all.'' We need a
    cluster of economic, health and educational initiatives that will
    empower our Native people to be able to maintain our unique land-based
    cultures and participate fully in the larger society. One such
    initiative is embodied in S. 2232 and H.R. 3351.
        America's Native peoples, including Alaska Natives, continue to
    suffer disproportionately high rates of unemployment and poverty, poor
    health, substandard housing, and associated social ills when compared
    to any other group in our nation. Although there has been steady
    improvement in absolute terms, particularly in the area of health, the
    fact remains that there has been little progress in the last 30 years
    towards closing the gap between Native peoples and the American public
    at large in most indicators of well-being.
        This poor statistical profile plagues Native communities in remote
    parts of Alaska, for example, despite a rich cultural legacy and
    abundant natural resources on their lands and in their waters. The
    extraction of natural resources from remote communities in Alaska,
    valued at billions of dollars, produces only modest direct economic
    benefit (jobs, household income, business purchases and public
    revenues) for most residents. Physical remoteness, distance from
    markets and population centers, poor physical infrastructure, and the
    lack of either a strong private sector or of healthy, transparent
    governmental institutions are among the reasons so many Native American
    economies remain stagnant. In several of these economies, these long-
    existing factors are compounded by a new challenge--the effects of
    climate change. The public perception may be that casino-style gaming
    is lifting tribes out of poverty, but the reality is that most Native
    American communities do not benefit from gaming due to geographic
    remoteness, legal constraints or other factors.
        To address this issue, AFN, working with the Association of Village
    Council Presidents (AVCP) and the Bristol Bay Native Association
    (BBNA), and their 87 federally recognized tribes, has spent several
    years developing and supporting an economic development proposal that
    would take the best lessons of the last 50 years of American experience
    in providing foreign aid to developing countries and apply them in the
    domestic context in remote, predominantly Native American areas. Since
    Native economies are often plagued by the same challenges as economies
    of the developing world, we believe strongly that our communities can
    benefit from lessons learned from international development assistance.
    These lessons include:

       The need to focus on sustainable poverty reduction, economic
            growth and job creation.

       The importance of local ownership, whereby the intended
            beneficiaries of programs determine priorities and are
            responsible for implementation.

       The need to focus on outcome-oriented objectives--where the
            beneficiaries determine, up-front, what outcomes they want to
            achieve and how they will measure success.

       The importance of establishing quantitative measures of
            success. Key to this are collecting baseline data up front, and
            establishing an arm's-length program of monitoring and
            evaluation that tracks progress against benchmarks and that
            highlights the need for mid-course adjustments.

       The importance of capacity building. Skills learned in
            setting objectives, implementing programs, and making
            adjustments based on measurable results are readily transferred
            to other programs and to public and private sector activities.

        AFN has advocated for building on the concepts and principles of
    the Millennium Challenge Corporation, and was pleased to work with
    Alaska's congressional delegation and Senators Akaka and Inouye in
    refining the concept. S. 2232 embodies the concept we believe is needed
    in our communities. It adapts the lessons of foreign aid to
    underdeveloped economies, such as the experience of the Millennium
    Challenge Corporation, to the provision of Federal economic development
    assistance to similarly situated remote Native American communities in
    this country.
        This bill will serve to re-invigorate Native economies by using a
    compacting model to channel a significant amount of development funds
    to implement locally designed economic development strategies. The bill
    authorizes $100 million over five years, for disbursement to a total of
    five pilot projects; one each in Alaska and Hawaii and three in the
    Lower-48 states.
        The objectives are simple: to enhance the long-term job creation
    and revenue generation potential of Native economies by creating
    investment-favorable climates and increasing Native productivity. A
    corollary, but equally important, objective is to improve the
    effectiveness of existing Federal economic development assistance by
    encouraging the integration and coordination of such assistance for the
    benefit of Native economies.
        Consistent with the philosophy of the Millennium Challenge
    Corporation, S. 2232 recognizes that communities that have made the
    threshold decision to improve their economic conditions and evince a
    ``readiness for development'' are precisely those most likely to make
    the best use of development aid. S. 2232 would provide Federal
    assistance, over and above the funding currently available, to those
    Native communities that are determined to be ``eligible entities'' by
    the Secretary of Commerce and are therefore poised to negotiate and
    enter into a bilateral compact with the United States. A key feature of
    the legislation is that the specific strategies and objectives will be
    determined by the eligible entities themselves.
        This novel federal initiative would have as its mission reducing
    poverty in Native communities. The compacts authorized under the bill
    would have to be consistent with the broad purposes of the Act, but
    must also contain five elements:

            1. The specific objectives for sustainable economic development
            and the reduction of poverty that the eligible entity and the
            United States expect to achieve;

            2. A description of the respective roles and responsibilities
            of the eligible entity and the United States in the achievement
            of such objectives;

            3. A list and description of regular benchmarks to measure
            progress toward achieving such objectives;

            4. An identification of the intended beneficiaries,
            disaggregated by income level, gender, and age, to the maximum
            extent practical; and

            5. A multi-year financial plan.

        A critical component of the demonstration project is in its demands
    for accountability in the performance of the Compact terms and the use
    of financial resources.
        For the Alaska component, AFN has been working closely with two
    Native regional organizations in southwest Alaska, the Association of
    Village Council Presidents and the Bristol Bay Native Association.
    Together these adjacent Native regions span 96,000 square miles, and
    contain 87 Native villages and one-quarter of the Native population of
    Alaska. These regions have a rich cultural heritage, and truly
    incredible natural resources, yet paradoxically have among the highest
    poverty and unemployment rates in the state, and in the country.
        We believe that these regions are ripe for this demonstration
    project. Both regional organizations are experienced with operating
    federal programs under Indian Self-Determination Act compacts, have a
    history of collaboration, and have done much of the planning legwork
    for undertaking economic development using this model.
        Our experience, and that of BBNA and AVCP and others, is that many
    federal programs that should foster economic development are
    splintered, suffer from lack of coordination between the federal
    agencies, are often poorly timed, and are complex and poorly understood
    by their intended beneficiaries. Thus, they remain under-utilized, as
    was borne out by the 2001 General Accounting Office report, GAO-12-193,
    which reviewed the effectiveness of some 100 federal programs that
    serve Native Americans.
        What we need is a paradigm shift in the way the federal government
    promotes economic development for Native American communities. S. 2232
    represents just such a shift. It also represents the fruition of
    several years of intense discussion within parts of the Alaska Native
    community on how we can meet the challenge of reducing poverty and
    promoting sustainable economic growth in our rural villages. S. 2232
    will enhance the long-term job creation and revenue generation
    potential of Native economies by creating investment-favorable climates
    and increasing Native productivity. Accordingly, we urge this Committee
    to pass S. 2232 as soon as possible.

        Senator Murkowski. [Presiding.] Thank you, Julie. Your full
    testimony will be included as part of the record. Thank you for
    all that you have done to help facilitate this.
        Byron, Mr. Mallot?
        Mr. Mallot. Thank you, Senator.
        My name is Byron Mallot. I am a former President of the
    Alaska Federation of Natives. When Julie asked if I might come
    to Washington to testify on this bill, I was very excited by
    the opportunity. Recognizing that it also involves hopefully
    demonstration projects in the State of Hawaii, and of course
    within Indian Country here in the Lower 48, I contacted a
    colleague and friend, Nanoa Thompson, who is a trustee of
    Kamehameha Schools in Hawaii, as well as the leader of the
    Polynesian Voyaging Society on whose board I sit, in order to
    obtain his counsel and his thoughts about this kind of
    potential.
        I certainly cannot speak for him, but I can make an
    observation regarding his thoughts. He was very excited by the
    idea. He tried to get back here to Washington in order to
    testify, but because of the shortness of time was unable to. As
    I think about Alaska, as you are well aware, Senator, we are
    beginning to celebrate 50 years of statehood. After 50 years of
    statehood, we are still wrestling with the kind of negative
    issues that you commented upon earlier. But also as you
    commented upon, we have much success to celebrate within our
    State, and even within rural Alaska, and particularly within
    the Native community. The success of ANCSA, the Alaska Native
    Claims Settlement Act, and the institutions that it has created
    and made successful over these 50 years, along with the
    discovery of oil at Prudhoe Bay, will be the historical
    touchstones for the first 50 years of statehood, and even well
    into the 21st century.
        But in spite of that success, and I think building upon
    best practices and what we have accomplished, this bill
    captures where we are, the notion that there is still much to
    be done, but recognizing that we need to be smart about where
    we go and how we move forward; the idea of being able to
    measure performance; the notion of being able to combine assets
    and resources from a multiple of agencies with different
    mandates in order to be flexible and responsive; the notion of
    creating incentive for Native institutions, Native communities,
    Native minds to bring to fruition opportunities that are
    building upon generations of learning. All of that is
    tremendously exciting.
        I think that as we begin a new century, it could take us to
    another level in terms of how we think of our relationship with
    the Federal Government, which is one of a trust responsibility;
    of how we think of about and how we work with agencies and
    institutions of the Federal Government; of how we work
    internally, the leadership of AFN as a statewide institution
    bringing ideas and advocacy to where it is needed; looking to
    its owner institutions such as here at this table, to provide
    direction and strength; and allowing the kind of innovation,
    the kind of leadership, the kind of new thinking and the need
    for new ways to accomplish what we need to accomplish is all
    what is most exciting to me about this legislation. I urge its
    passage.
        Thank you very much.
        Senator Murkowski. Thank you. We appreciate your testimony
    here and joining us this morning.
        Next, we will hear from Mr. Ralph Anderson with Bristol Bay
    Native Association out of Dillingham. Welcome.

         STATEMENT OF RALPH ANDERSON, CEO, BRISTOL BAY NATIVE
                              ASSOCIATION

        Mr. Anderson. Thank you, Senator Murkowski.
        I am Ralph Anderson. I am the Chief Executive Officer at
    the Bristol Bay Native Association, which is a nonprofit
    consortium of 31 tribes in Bristol Bay.
        First, I want to thank you and Senators Steven, Inouye and
    Akaka, for introducing this important piece of legislation. It
    will help to make a transformative, positive change in the way
    the Federal Government approaches economic assistance in Native
    American communities.
        It will be a large step toward lifting some of the most
    impoverished people in America out of poverty and linking us to
    the national and global economy, while preserving the
    distinctive cultural lifestyle values that make us the Native
    people who we are.
        It is true that we have made much progress in terms of
    health, education, housing and other social indicators in the
    decades since ANCSA, but our improvements haven't really
    completely closed the gap with other Native Americans and with
    other Alaskans. We still lag behind in terms of average income
    and lead in most negative social indicators such as suicide
    rates, incarceration rates, alcohol and drug abuse and
    joblessness. We are still more likely to suffer alcohol and
    drug addiction, joblessness than average Alaskans. We remain
    heavily reliant on Government-provided services.
        At BBNA, we have been thinking long and hard about what
    might be done to improve our economy and the general well being
    of our people. To provide some context, the Bristol Bay region
    has about 7,000 people living in 31 villages in an area the
    size of Ohio. We have many well-known obstacles to progress.
    Our villages are remote, transportation costs are high, and the
    mainstay of our cash economy, the commercial fishing industry,
    has been in relative decline the past few years. There have
    never been many year round jobs in the villages. Many people
    have moved out of our region.
        With the rise in oil prices, gasoline in Dillingham is now
    $4.93 per gallon. Heating oil is $4.20 per gallon. And prices
    for both in the villages can range between $5 and $10 a gallon.
    While it is true that the Federal Government already spends a
    great deal of money providing services to Alaska Natives, a
    feature of this funding is that most of it is provided in
    distinct channels, with Indian Health Service funding for
    health, NAHASDA money for housing, and BIA funding for line
    services, some road construction and a variety of social and
    education services.
        In a sense, the Native organizations in rural Alaska such
    as BBNA have grown up around these funding sources. That
    sometimes gives us tunnel vision that makes it difficult to
    think more broadly beyond the service programs that are already
    provided. None of these major funding streams has directly
    promoted economic growth, although the BIA does have a loan
    program and there is some flexibility in the use of other BIA
    funds. BBNA, for example, operates BIA programs, but we receive
    a grand total of $9,000 specifically to support economic
    development.
        This hearing is about a bill that is the fruition of
    discussions about economic development within the Alaska Native
    community over the past several years. The fundamental idea is
    to build upon two success stories. One is the experience of the
    Millennium Challenge Corporation which provides funds to
    developing countries for use in locally determined economic
    development strategies, but with clear accountability and
    measures for determining success built on the funding
    agreements.
        The other success story is domestic, the tribal self-
    governance compacting under the Indian Self-Determination Act.
    Tribal self-governance has allowed tribal entities to operate
    Federal services and in many instances to design programs, but
    to date it is limited to the Indian Health Service and BIA.
    Both the Millennium Challenge Corporation and Indian self-
    determination use the compacting devices for providing funds,
    which has the effect of cutting through the red tape normally
    associated with government contracts, and also signifies that
    these agreements are more than just ordinary grants. They are
    commitments between governments.
        We believe that by providing funds for the Native
    communities specifically to foster economic development, S.
    2232 plugs a major gap. It has features that we believe are
    absolutely critical for such a program to succeed. One, it
    provides enough funding to make a difference. Two, it is self-
    directed and allows the recipients to develop the economic
    development strategies and projects to be funded, although with
    the advice and assistance of the funding agency. Number three,
    it provides assurance that funding will be available for the
    entire project period, as opposed to the annual funding of most
    grants. And finally four, it requires benchmarks for measuring
    our success.
        The bill authorizes a new demonstration project for
    economic development with the Department of Commerce that would
    fund five demonstration projects nationally for five years.
    Total funding would be $100 million over the five years. Alaska
    Natives would receive one demonstration project, with Native
    Hawaiians one and tribes in the Lower 48 would receive three.
        Another important feature of the bill is that it would
    allow, but not require, existing funding sources or existing
    funding from a variety of agencies to be integrated into the
    compact.
        We believe that this is an exciting opportunity to make a
    real difference in the lives of Native American people and we
    urge that it be enacted.
        Thank you very much for allowing me to testify.
        [The prepared statement of Mr. Anderson follows:]

         Prepared Statement of Ralph Anderson, CEO, Bristol Bay Native
                                  Association
        Chairman Dorgan, Vice-Chairman Murkowski, and distinguished members
    of the Committee, thank you for the opportunity to appear before you
    today to speak in support of S. 2232, the Foreign Aid Lessons for
    Domestic Economic Assistance Act.
        My name is Ralph Andersen. I am testifying today in my capacity as
    Chief Executive Officer of the Bristol Bay Native Association, which is
    a non-profit Native organization based in Dillingham and serving 31
    communities in Southwest Alaska. I have been in my current position for
    about 2\1/2\ years. I am also from Bristol Bay and have spent most of
    my life in rural Alaska--I grew up in the village of Clarks Point, a
    small village about 15 miles from Dillingham on Nushagak Bay.
        First, on behalf of BBNA, I would like to thank Senators Murkowski,
    Stevens, Inouye and Akaka for introducing S. 2232, and to thank this
    Committee for providing the opportunity to testify. We believe this
    legislation, if enacted, will make a transformative, positive change in
    the way the Federal Government approaches economic assistance to Native
    American communities. It will be a large step toward lifting some of
    the most impoverished people in America out of poverty and linking them
    to the national and global economy, while preserving the distinctive
    cultural and lifestyle values that make we Native people who we are.
        It is true that although we have made much progress in terms of
    health, education, housing and other social indicators in the decades
    since the Alaska Native Land Claims Settlement, but our improvements
    have not closed the gap with other Americans. We still lag far behind
    in terms of average income and lead in most negative social indicators
    such as suicide rates, incarceration rates, alcohol and drug abuse, and
    joblessness. We are still more likely to suffer alcohol and drug
    addiction and joblessness than average Alaskans. And we remain heavily
    reliant on government-provided services.
        At BBNA have been thinking long and hard about what might be done
    to improve our economy and the general well-being of our people. To
    provide some context, the Bristol Bay Region has about 7,000 people
    living in scattered communities in an area the size of Ohio. We have
    many well-known obstacles to progress: our villages are remote,
    transportation costs are high, the mainstay of the cash economy--
    commercial fishing--has been in relative decline, and there have never
    been many year-round jobs in the villages. Many people have moved out
    of our region. With the rise in oil prices, gasoline in Dillingham is
    now $4.93 per gallon, heating oil is $4.20, and prices for both in the
    villages can be over $5 or even $7 per gallon.
        Yet--in a seeming paradox--the Bristol Bay region is rich in
    natural resources, it has a vibrant Native culture, the Native
    corporations own hundreds of thousands of acres of land, and there is
    no reason to think our commercial salmon fishery won't continue to be
    an important economic base for the foreseeable future. By any measure
    Bristol Bay is a world class destination for sports hunters and
    fishermen, and for eco-tourists. Improvements in telecommunications
    partially offset geographic barriers, and link even the smallest of our
    villages to the modern global environment.
        Given the positive factors, we do not believe there is any inherent
    reason why Bristol Bay and rural Alaska in general cannot develop a
    robust sustainable economy, while preserving our culture and lifestyle.
        While it is true that the Federal Government already spends a great
    deal of money providing services to Alaska Natives, a feature of this
    funding is that most of it is provided in distinct channels--Indian
    Health Services funding for health, NAHASDA money for housing, and
    Bureau of Indian Affairs funding for land services, some road
    construction, and a variety of social and education services. In a
    sense the Native organizations in rural Alaska have grown up around
    these funding sources, and that may sometimes give us tunnel vision
    that makes it difficult to think more broadly, beyond the service
    programs we already provide.
        None of these major funding streams is directed at promoting
    economic growth, although the BIA does have a loan program and there is
    some flexibility in the use of other BIA funds. BBNA operates BIA
    programs, but we receive a grand total of only about $9,000
    specifically to support economic development.
        Today's hearing is about a bill that is the fruition of discussions
    about economic improvement within the Alaska Native community over the
    last several years. The fundamental idea is to build upon two success
    stories: One is the experience of the Millennium Challenge Corporation,
    which provides funds to developing countries for use in locally
    determined economic development strategies, but with clear
    accountability and measures for determining success built into the
    funding agreements.
        The other success story is domestic: tribal self-governance
    compacting under the Indian Self-Determination Act. Tribal self-
    governance has allowed tribal entities to operate federal services and
    in many instances to design the programs, but to date it is limited to
    Indian Health Service and Bureau of Indian Affairs funding. Both the
    Millennium Challenge Corporation and Indian Self-Governance use the
    ``compacting'' device for providing funds, which has the effect of
    cutting through the red tape normally associated with government
    contracts, and also signifies that these agreements are more than just
    ordinary grants. They are commitments between governments.
        We believe that by providing funds to the Native community
    specifically to foster economic development, S. 2232 plugs a major gap.
    It has features that we believe are absolutely critical for such a
    program to succeed.

            1. It provides enough funding to make a difference.

            2. It is self-directed. It allows the recipients to develop the
            economic development strategies and projects to be funded,
            although with the advice and assistance of the funding agency.

            3. It provides assurance that funding will be available for the
            entire project period (as opposed to the annual funding of most
            grants).

            4. It requires benchmarks for measuring success.

        The bill authorizes a new demonstration project program for
    economic development, within the Department of Commerce, that would
    fund five demonstration projects nationally for 5 years. Total funding
    would be $100 million over the 5 years. Alaska Natives would receive
    one demonstration project, Native Hawaiians one, and tribes in the
    Lower 48 states would receive three. Another important feature of the
    bill is that it would allow, but not require, existing funding from a
    variety of federal agencies to be integrated into the compacts.
        We believe this is an exciting opportunity to make a real
    difference in the lives of Native American people, and we urge that it
    be enacted.
        Thank you again for the opportunity to testify.

        Senator Murkowski. Thank you, Ralph. We appreciate your
    comments and your presence here today.
        Next, we will hear from Zack Brink, who is Vice President
    of the Association of Village Council Presidents out of Bethel.
    Welcome, Zack.

    STATEMENT OF ZACK BRINK, EXECUTIVE VICE PRESIDENT, ASSOCIATION
                     OF VILLAGE COUNCIL PRESIDENTS

        Mr. Brink. Thank you, Senator Murkowski, and thank you for
    the opportunity to speak to you on behalf of the Association of
    Village Council Presidents about the importance of this bill.
        My name is Zack Brink. I am testifying today in my capacity
    as Executive Vice President of the Association of Village
    Council Presidents, whose headquarters are located in Bethel,
    Alaska.
        I have worked for AVCP for a total of 15 years. Myron
    Naneng, AVCP President, was not able to attend this hearing and
    sends his apologies and best wishes.
        On behalf of the Native people of the Yukon Kuskokwim
    Delta, thank you for your many years of service in the
    Congress, in the Senate, and on this Committee meeting here
    today. We are grateful for you and your staff's hard work over
    the years. Quyana.
        By way of background, the AVCP region in Southwest Alaska
    represents 56 tribes and is approximately the size of Oregon.
    AVCP was organized in 1964 and serves as the regional Native
    non-profit corporation.
        Our message today is that the Association of Village
    Council Presidents is very supportive of S. 2232 and urges
    Congress to act and pass this bill.
        For the past several years, the Association of Village
    Council Presidents, Bristol Bay Native Association and the
    Alaska Federation of Natives have been working together in an
    innovative manner. We have partnered together to lay the
    groundwork for our project and we are ready to take the next
    step. We have taken it upon ourselves to make the lives of our
    people better and we are here to share with you how important
    this project is for us.
        The overall goal of the project is to substantially improve
    the economic, educational, social health and cultural status of
    our people. We see these four areas of focus as tied together.
    It is our belief that any improvement in one area directly
    impacts the other areas. In our region, the predominant Native
    language is Yup'ik.
        Despite a rich cultural heritage and widespread reliance on
    subsistence resources, Southwest Alaska has the highest poverty
    rates in the State and very high instances of substance abuse,
    suicide and other indicators of social health. By funding this
    bill, the lives of our people in the region would benefit
    greatly in the economic, educational, social and cultural
    arenas.
        We want to build on what we already know that works in our
    region. Our strengths include our Yup'ik culture, language and
    people. We want to design the projects to fit our region and to
    build on our past successes. Specifically, we want this project
    to work in our villages. We want to meet the challenge of
    reducing poverty and promoting sustainable economic growth in
    our rural villages.
        When considering S. 2232, please consider the following
    issues. The AFN/AVCP/BBNA partnership is working. Over the past
    several years, this partnership has been preparing for this. We
    have put considerable time, effort and planning into the
    project. AVCP is committed to making it work.
        The AVCP region is ready to take the next step. Our 56
    tribes met and passed resolutions in support of the project,
    both at the regional and village levels. The AVCP Board of
    Directors is in full support of the project.
        Our strategy works for us. The overall goal of the project
    is to substantially improve the economic, educational, social
    health and language/cultural status of our people. This
    strategy is holistic and it works for us in filling the gaps.
    We want to design our project in this manner.
        We want to share what we learn. In this demonstration
    project, we want to share what we learn. We also want to learn
    from others through the model, specifically through the
    Millennium Challenge Corporation model. We want to design our
    own model. Lessons learned from a domestic demonstration will
    help all of us.
        The AVCP region exists in an environment of extremes. What
    that means is that all the economic, educational, social
    health, and language/cultural indicators are either very high
    or very low. They are either at one end of the spectrum or the
    other. The lessons learned will help all of us.
        The project will take time. We know that this will not
    happen overnight or just over a couple of years. This is a
    long-term project and we want it to be successful.
        In conclusion, AVCP believes that this project will work
    and we ask for your support.
        Quyana.
        [The prepared statement of Mr. Brink follows:]

    Prepared Statement of Zack Brink, Executive Vice President, Association
                         of Village Council Presidents
    Introduction
        Thank you for the opportunity to speak before you today on behalf
    of the Association of Village Council Presidents to talk about the
    importance of Senate Bill 2232: Foreign Aid Lessons for Domestic
    Economic Assistance Act of 2007.
        My name is Zack Brink. I am testifying today in my capacity as
    Executive Vice President of the Association of Village Council
    Presidents whose headquarters are located in Bethel, Alaska. I have
    worked for AVCP for a total of 15 years. Myron P. Naneng Sr., AVCP
    President, was not able to attend this hearing and sends his apologies
    and best wishes.
        On behalf of the Native people of the Yukon Kuskokwim Delta, thank
    you for your many years of service in the Congress, in the Senate, and
    on this Committee meeting here today. We are grateful for you and your
    staffs hard work over the years. Quyana--Thank you.
    Background
        By way of background, the AVCP Region in southwest Alaska
    represents 56 Tribes and is approximately the size of Oregon. AVCP was
    organized in 1964 and serves as the regional Native-Nonprofit
    Corporation.
    S.B. 2232: Foreign Aid Lessons for Domestic Economic Assistance Act of
            2007
    Our message today is that the Association of Village Council Presidents
            is very supportive of S.B. 2232 and urges Congress to act and
            pass this Bill.
        For the past several years the Association of Village Council
    Presidents, Bristol Bay Native Association, and the Alaska Federation
    of Natives have been working together in an innovative manner. We have
    partnered together to lay the groundwork for our project and we are
    ready to take the next step. We have taken it upon ourselves to make
    the lives of our people better, and we are here to share with you how
    important this project is for us.
        The overall goal of the project is to substantially improve the
    economic, educational, social health and cultural status of our people.
    We see these four areas of focus as tied together. It is our belief
    that any improvement in one area directly impacts the other areas. In
    our region the predominant Native language is Yup'ik. Despite a rich
    cultural heritage and widespread reliance on subsistence resources,
    Southwest Alaska has the highest poverty rates in the state, and very
    high instances of substance abuse, suicide, and other indicators of
    social health. By funding this Bill, the lives of our people in the
    region would benefit greatly in the economic, education, social and
    cultural arenas.
        We want to build on what we already know that works in our region.
    Our strengths include our Yup'ik culture, language and people. We want
    to design the project to fit our region and to build on our past
    successes. Specifically, we want this project to work in our villages.
    We want to meet the challenge of reducing poverty and promoting
    sustainable economic growth in our rural villages.
    Issues to Consider
        When considering S.B. 2232 please consider the following issues:

            1. The AFN/AVCP/BBNA Partnership is working. Over the past
            several years this partnership has been preparing for this. We
            have put considerable time, effort, and planning into the
            project. AVCP is committed to making it work.

            2. AVCP Region is ready to take the next step. Our 56 Tribes
            met and passed resolutions in support of the project both at
            the regional and village levels. The AVCP Board of Directors
            are in full support of the project.

            3. Our strategy works for us. The overall goal of the project
            is to substantially improve the economic, educational, social
            health and language/cultural status of our people. This
            strategy is holistic and it works for us in filling the gaps.
            We want to design our project in this manner.

            4. We want to share what we learn. In this demonstration
            project we want to share what we will learn. We also what to
            learn from others through this model, specifically through the
            Millennium Challenge Corporation Model.

            5. We want to design our own model. Lessons from a Domestic
            Demonstration will help all of us. The AVCP region exists in an
            environment of extremes. What that means is that all the
            economic, education, social health, and language/cultural
            indicators are either very high or very low. They are either at
            one end of the spectrum or the other. The lessons learned will
            help all of us.

            6. The project will take time. We know that this will not
            happen overnight or just over a couple years. This is a long
            term project and we want it to be successful.

        In conclusion, AVCP believes that this project will work and we ask
    for your support.
        Quyana. Thank you.

        Senator Murkowski. Thank you, Zack. We appreciate your
    testimony this morning.
        We will finally hear from Mr. Paul Applegarth. Paul is the
    CEO of Value Enhancement International out of Connecticut and
    formerly the CEO of the Millennium Challenge Corporation.
    Welcome, Mr. Applegarth.

     STATEMENT OF HON. PAUL V. APPLEGARTH, CEO, VALUE ENHANCEMENT
                             INTERNATIONAL

        Mr. Applegarth. Thank you, Madam Vice Chairman, and thanks
    for the invitation to speak today about the Foreign Aid Lessons
    for Domestic Economic Assistance Act, which Senators Inouye,
    Stevens, Akaka and yourself have introduced. It is a real
    pleasure to be here. I will speak only briefly this morning,
    but I have given longer remarks for the record, which with your
    permission would be added to it.
        Senator Murkowski. Those are included as part of the
    record.
        Mr. Applegarth. Thank you.
        It is likely that anyone coming into this Committee room by
    mistake this morning would wonder why we are talking about
    foreign aid in the Committee on Indian Affairs, yet we are,
    thanks to an original insight of the leaders of AFN, BBNA, and
    AVCP. About two years ago, they came to me, introduced
    themselves, and said in effect, even though we are in the
    United States, our people face challenges like those in a
    developing country. Do you have some ideas from your experience
    in international development that might benefit us?
        I gave them a couple of suggestions, and thought that would
    be it. So to my surprise, they came back several months later,
    and even more to my surprise, they had implemented by earlier
    suggestions. They asked if there was more they could do, and
    that ultimately led to the reason that we are here today,
    legislation which establishes a pilot program targeted to
    Native Americans based on the lessons of 50 years of
    international development assistance.
        The objective of the legislation is to promote poverty
    reduction among Native Americans through sustainable growth and
    economic development using the lessons of international
    development. The MCC, which is a major U.S. initiative in
    foreign aid, is built on these same lessons.
        As you have heard this morning from my panel colleagues and
    as you noted in your own remarks and Chairman Dorgan noted in
    his remarks, despite some improvement in recent decades, many
    Native American communities, whether they are American Indians
    or Alaska Natives or indigenous people in Hawaii, face issues
    similar to those that people face in the developing world. They
    continue to suffer disproportionately high rates of
    unemployment and poverty, poor health, substandard housing, a
    lack of access to basic infrastructure like power and water,
    and limited job opportunities.
        These conditions lead to high alcoholism and suicide rates,
    and the loss of young people to urban areas, threatening
    traditional culture and heritage and in the case of Alaska at
    least, a valued traditional lifestyle. Now, many communities
    also face increased concerns about environmental changes that
    could be precipitated by global warming.
        As you know, Madam Vice Chairman, the concept of foreign
    aid is not well regarded by many Americans. In several
    instances, this poor reputation is probably deserved. However,
    foreign aid has had successes. In the more than 50 years of
    international development assistance, there have been a number
    of lessons learned about what works and what doesn't work. The
    lessons include that programs intended to assist long-term
    development should explicitly focus on sustainable poverty
    reduction, economic growth and job creation. Sometimes those
    programs get diverted to all other kinds of objectives, but if
    you do not make poverty reduction and growth the objective of
    the program, they are not likely to happen.
        Another lesson is that local ownership is important.
    Development assistance is much more effective when the
    beneficiaries identify what they need and themselves take
    responsibility for ensuring that the programs are a success.
        If I can divert some from my prepared remarks, I think if
    you listened to some of the discussion this morning, you would
    think this legislation is primarily about better coordination
    in Washington, more efficiency, and more program integration. I
    think that is a valuable plus of the legislation, but it misses
    the fundamental point. This approach represents a fundamental
    change in the way programs work. Who decides? The people who
    are going to benefit or the people here in Washington
    administering the program?
        Who is responsible for success, the people here in
    Washington or the potential beneficiaries? It is a different
    mind set of who has ownership, who decides what the priorities
    are, and who is responsible for success or failure.
        Programs should also focus on results, by the impact on the
    people who are the intended beneficiaries. Simply focusing on
    how much money is spent or how quickly it is dispersed is a
    recipe for disaster. Viewing development assistance more as an
    investment and focusing on what you get for these taxpayer
    dollars, as this legislation does, is a much more effective
    approach in determining which programs work and making sure
    that they work.
        It is also important to establish quantitative measures of
    success up front, collect baseline data, and track progress
    toward those objectives. This doesn't take a long time to do,
    but it is very important in determining both whether your
    program is successful and whether you need to make mid-course
    adjustments to make it work better.
        Another lesson is that those programs should also build
    capacity, as well as achieve specific objectives. Skills
    learned in setting objectives and implementing programs are
    readily transferred to other programs and to other public and
    private sector activities.
        And finally, the assurance of longer term funding over the
    life of a program is important. Being dependent on annual
    appropriations, which are uncertain in their amount and when
    and if the money will ever arrive, and which expire at the end
    of a fiscal year, makes program management very difficult. It
    leads to inefficiencies, wasteful spending and in the words of
    several of my friends in the developing world, it has led to
    corruption in some cases. Far better to have steady assured
    funding up front.
        The legislation before us today is built upon these
    lessons. Under it, the potential beneficiaries have ownership
    from the beginning. They choose the priorities. They compete
    based on the quality of their plans, and they have to win.
    Competing and winning builds ownership.
        They are judged on their existing poverty rates and their
    ability to implement a good plan. The funding is explicitly
    directed to promoting economic growth and the elimination of
    poverty. Each proposed program must have specific objectives,
    identify who will benefit and establish regular benchmarks to
    measure progress. Ownership is built up front. The entities
    must compete. It is their plan and they have responsibility to
    implement it. This of course also builds local capacity and
    promotes entrepreneurship. Compacts can be up to five years in
    length and are fully funded up front. The funding is ``no
    year'' money. The authorization does not expire, so there is no
    artificial rush to spend everything by September 30 of each
    fiscal year.
        Let me give you a concrete example of how this might work
    in practice. One of the entities in Alaska that hopes to be
    able to participate in the demonstration project has already
    begun working on what its proposal might be. Thanks to prior
    studies, it has excellent social, economic and demographic data
    on the population of Alaska, both Native American and other.
    While the data shows improvement for all groups, it also shows
    a persistent gap between the status of Native Americans and
    other parts of the population.
        The program they are working on is explicitly targeted to
    help close that gap. It is testing the program against the
    lessons learned. The priorities are decided in Alaska by the
    people who would benefit from the program, people from one of
    the poorer areas of Alaska, not here in Washington. The
    intended results are specific, targeted to growth and poverty
    reduction, and measurable. The beneficiaries, as well as you
    here on the Hill, performance managers at OMB, and U.S.
    taxpayers can know in advance what the funding will be used for
    and what the implementation plan is. They will be able to
    monitor progress and at the end of the program they will be
    able to know with confidence whether it has been successful.
        The proposed legislation also incorporates one lesson not
    built into the original Millennium Challenge bill. It is
    structured as a pilot and a demonstration project. It allows
    the parties to learn. Establishing the initial program as a
    demonstration project gives time to move up the learning curve
    and to get startup issues behind them. Once they have, the
    experience with the pilot can be used to fine tune both a
    larger program built on the same lessons, as well as to make
    adjustments in other programs intended to benefit Native
    Americans.
        The benefits of a pilot are not limited to Native Americans
    and other directly involved in the programs. There is a need
    for education elsewhere as well. MCC, which was a start up in
    2004, has been criticized by some, and I think quite unfairly,
    for being slow in making commitments and disbursements.
    Certainly, in a world of fast-disbursing emergency assistance
    and in which money not spent by September 30 is lost, it may
    seem slow. But emergency assistance to provide relief is not
    the model or the lessons on which MCC was built, nor how it or
    the program established by this legislation should be
    evaluated. As each highlighted this morning, those are long-
    term fundamental problems, and they require deliberative, well
    planned and long-term solutions.
        Ultimately, both MCC and this legislation should be
    evaluated on the outcomes they achieve and the progress their
    programs make toward their objectives and their benchmarks. In
    the interim, since the outcomes are not known immediately,
    there are other measures. In terms of the pace of its own
    commitments, MCC compares favorably with other international
    aid institutions, even though it has slowed somewhat from its
    early days. There are other benchmarks set out in my written
    testimony.
        In short, establishing the program first as a demonstration
    project will allow us time to educate everyone on the approach
    and to better manage expectations.
        In closing, let me say, as you know, this legislation has
    bipartisan sponsors. The original MCC legislation was passed
    with bipartisan support and the support of many of your Senate
    colleagues who serve on the Senate Foreign Relations Committee.
    I remember with particular appreciation and respect the support
    and assistance that I and the others at MCC received from many
    of them, including both Senators Lugar and Biden, who were the
    Chair and Co-Chair of the Committee, and Senators Feinstein,
    Coleman, Hagel, Dodd, Sununu and others. This was a very
    distinguished and helpful group, and the result showed the
    value of a bipartisan effort.
        You all now have the opportunity to bring some of these
    international lessons and ideas here domestically to address
    the same fundamental problems of helping people to escape
    poverty and to achieve sustainable long-term growth and to do
    so on a bipartisan basis. I hope that you will. Thanks very
    much.
        [The prepared statement of Mr. Applegarth follows:]

     Prepared Statement of Hon. Paul V. Applegarth, CEO, Value Enhancement
                                 International
        Good morning, Mr. Chairman and Madame Vice-Chairwoman, Senator
    Murkowski, and Members of the Committee. I am Paul Applegarth, CEO of
    Value Enhancement International, and, formerly, the founding CEO of the
    U.S. Millennium Challenge Corporation.
        Thank you for the invitation to speak with you today about S. 2232,
    the Foreign Aid Lessons for Economic Assistance Act of 2007, introduced
    by Senators Inouye, Stevens, Akaka, and yourself, Madame Vice-
    Chairwoman. It is a pleasure to be here. I will speak only briefly this
    morning, but with your permission will provide longer written remarks
    for the record.
        It is likely that anyone entering this Committee room by mistake
    this morning would be wondering why we are discussing Foreign Aid in
    the Committee on Indian Affairs. Yet we are, thanks to an original
    insight of the leaders at the Alaskan Federation of Natives, BBNA, and
    AVCP.
        About two years ago, they came to me, introduced themselves, and
    said, in effect: ``Even though we are in the United States, our people
    face challenges like those in a developing country. Do you have some
    ideas from your experience in international development that might
    benefit us? ''
        I gave them a couple of suggestions, and thought that would be it.
    Somewhat to my surprise, they came back several months later, and even
    more to my surprise, had implemented my earlier suggestions. They asked
    if there was more they could do, and that ultimately led to the reason
    we are today--legislation which establishes a pilot program targeted to
    Native Americans based on the lessons of fifty years of international
    development assistance.
        The objective of the legislation is to promote poverty reduction
    among Native Americans through sustainable growth and economic
    development, utilizing these lessons of development. The Millennium
    Challenge Corporation, the United States' major new initiative in
    foreign aid, is built on these same lessons. The experience with the
    pilot projects created by the legislation can be used to fine-tune both
    a larger program based on the same lessons, as well as to make
    adjustments in other programs intended to benefit Native Americans.
        As you have heard this morning from my colleagues here on the panel
    despite some improvement in recent decades in measures of their
    economic and social well-being, many Native American communities--
    American Indians, Alaska Natives and Native Hawaiians--do face issues
    similar to those faced by peoples in the developing world. They
    continue to suffer disproportionately high rates of unemployment and
    poverty, poor health, substandard housing, a lack of access to basic
    infrastructure like reliable power and water, and limited job
    opportunities. These conditions lead in turn to high alcoholism and
    suicide rates, and the loss of young people to urban areas, threatening
    traditional culture and heritage, and the case of Alaska, a valued
    traditional life style. Now, many communities also face increased
    concerns about environmental changes that could be precipitated by
    global warming.
    The Lessons of International Development
        Mr. Chairman, as you know, the concept of what foreign aid does is
    not well regarded by many Americans. In several instances, this poor
    reputation is richly deserved. However, foreign aid and development
    assistance have had a number of successes. In the more that fifty years
    of international development assistance, there have been a number of
    lessons learned--lessons about what works and what does not.
        Because Native economies are often plagued by the same challenges
    as the economies of the developing world, they are likely to benefit
    from these lessons. The legislation we are discussing today has been
    designed with them in mind.
        The lessons include:

            Lesson #1: Programs intended to assist long-term development
            need to explicitly focus on sustainable poverty reduction,
            economic growth and job creation. If you do not make poverty
            reduction and growth the objective of the program, it is less
            likely to happen. Much of U.S. foreign aid has other
            objectives. It is directed to important humanitarian
            assistance, to disaster relief efforts, or simply to reward
            friends of the United States. Many of the efforts are by their
            nature short-term. To achieve long-term poverty reduction and
            ensure Native Americans permanently escape the cycle of
            poverty, these short-term assistance efforts must be
            complemented with assistance explicitly targeted to economic
            growth, including development of the private sector. If
            sustainable poverty reduction and job creation are not explicit
            objectives, experience shows that they are less likely to
            happen.

            Lesson #2: Policies matter. If a country's policies are not
            supportive of development, if they do not fight corruption,
            promote economic freedom, and invest in their people's health
            and education, including the education of young women, if they
            do not manage their natural resources well, growth does not
            occur.

            As the chart on the next page shows, there is a strong
            correlation among good polices, aid effectiveness and growth
            rates. Fortunately, by being in the United States, Native
            communities are relatively well off in terms of their macro-
            policy environment. There are certainly improvements to be
            made, but we rank near the top of most country policy rankings.

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Lesson #3: Local ownership is important. Intended beneficiaries
            of programs should determine priorities and be responsible for
            implementation.

            Critics of traditional approaches to development assistance
            sometimes say that ``it consists of consultants and development
            officials from developed countries going to developing
            countries and saying `You need this, and we're here to do it
            for you.' \1\ They then do their work, depart for their home
            countries, and leave nothing behind.'' This assertion does an
            injustice to many dedicated professionals, but does contain at
            least a kernel of truth. Development assistance is more
            effective when the beneficiaries identify what they need, and
            themselves take responsibility for insuring that the programs
            are a success.
    ---------------------------------------------------------------------------
        \1\ Similar criticisms are made of Congressional ``earmarks'' that
    mandate that certain amounts of foreign aid must be directed to
    specific purposes.

            There is no Federal economic development paradigm for Indian
            country, and if there is list of Lessons Learned for Indian
            economic development assistance similar to those in the
            international area, no one I have asked is aware of it.
            However, it should be acknowledged that Native American
            communities have some experience with this approach \2\ The
            Foreign Aid Lessons for Domestic Economic Assistance Act of
            2007 builds on the most effective tools to date: self-
            determination, contracting and self-governance, and leave
            provide broad Federal parameter but leave specific program
            objectives and tactics to the tribes.
    ---------------------------------------------------------------------------
        \2\ The highly regarded Indian Self-Determination and Education
    Assistance Act of 1975 (25 U.S.C. 450 et. seq.) has been particularly
    effective in devolving Federal decision making and authority to
    administer programs and services from the United States to tribal
    governments. Its transfer of authority and resources has resulted in
    more effective and efficient program administration as well as the
    development of an Indian civil service whose skills are transferable to
    tribal economic development efforts. At the end of the day, however,
    the ISDEAA is a mechanism whereby Indian tribes and tribal consortia
    manage Federal funds, and is therefore akin to a contracting program.

            Lesson #4: Programs should focus on, and be measured by their
            outcomes--by their impact on the people they are intended to
            help. Simply focusing on how much money is spent and how
            quickly it is disbursed is a recipe for disaster. Rather, an
            investment approach whereby the beneficiaries determine, up-
            front, what results they want to achieve, and how they will
            measure success is crucial, i.e., ``what they will get for the
    ---------------------------------------------------------------------------
            money.''

            Lesson #5: It is important to establish quantitative measures
            of success up-front, and to track the progress toward those
            objectives. Proponents of many programs claim success in
            qualitative terms. However, establishing clearly articulated
            quantitative targets and rigorously tracking progress toward
            those targets promotes accountability and leads to more
            successful programs. Keys to this are collecting baseline data
            up front, and establishing an arm's-length program of
            monitoring and evaluation that tracks progress against
            benchmarks and that highlights the need for mid-course
            adjustments.

            Lesson #6: Each program should build capacity, as well as seek
            to achieve its specific objectives. This is why local ownership
            and responsibility for implementation is so important. Skills
            learned in setting objectives, implementing programs, and
            making adjustments based on measurable results are readily
            transferred to other programs and to public and private sector
            activities.

            Lesson #7: Assurance of longer term funding over the life of a
            program is important for success. Being dependent on annual
            appropriations, which are uncertain in their amount, and when--
            and even if--the money will arrive, and which expire at the end
            of a fiscal year, makes program management difficult. It leads
            to inefficiencies, wasteful spending, and in some cases
            corruption.

    S. 2232 and the Lessons of Development
        The original legislation establishing MCC is built on these
    lessons, as is the legislation before you today.
        Potential beneficiaries compete to be selected for funding, based
    on the quality of their plans, their existing poverty rates, and their
    ability to implement the plan. Funding is explicitly directed to
    promoting economic growth and the elimination of poverty.
        Ownership is built in up front, as the entities must compete, it is
    their plan, and they have responsibility to implement it. This of
    course builds local capacity, and promotes entrepreneurship.
        Compacts can be for up to five years of operations, and are fully
    funded up front.
        Funding is ``no year'' money; i.e., authorizations do not expire,
    so there is no artificial rush to spend everything by September 30 of
    each year.
        Finally, programs proposed under the legislation must have specific
    objectives, identify intended beneficiaries, and establish regular
    benchmarks to measure progress.
        To give an example of how this will work in practice: One of the
    entities in Alaska that hopes to be able to participate in the
    demonstration project has already begun working on what its proposal
    might be. Thanks to prior studies, it has excellent social, economic,
    and demographic data on the population of Alaska, both Native American
    and other. While the data shows improvement for all groups, it also
    shows a persistent gap between the status of Native Americans and other
    parts of the population. The program they are working on is explicitly
    targeted to help close that gap. Intended results are specific,
    targeted to growth and poverty reduction, and measurable. The
    beneficiaries, you here on the Hill--and U.S. taxpayers--can know in
    advance for what the funding will be used and what the implementation
    plan is. You will be able to monitor progress, and, at the end of the
    program, know whether it has been successful.
    Advantages of a Demonstration Project and Benchmarks for Success
        The proposed legislation also incorporates one lesson not built
    into the original MCC bill--it is structured as a pilot and
    demonstration project. It allows the parties to learn.
        The Foreign Aid Lessons for Domestic Economic Assistance Act of
    2007 represents a fundamental change in approach. Many potential
    beneficiaries are accustomed to having the government set priorities,
    design programs, handle implementation, procure goods and services, and
    manage many other aspects of these activities.
        It will take time for Native Americans--in Alaska, Hawaii, and the
    lower 48 states--and government officials to understand that this
    approach is different and to come up the learning curve. Once they
    have, the experience with the pilot can be used to fine-tune both a
    larger program based on the same lessons, as well as to make
    adjustments in other programs intended to benefit Native Americans.
        The benefits of a pilot are not limited to Native Americans and
    others directly involved in the programs. There is a need for education
    elsewhere as well. MCC, which was a start-up as recently as 2004--has
    been criticized by some--for the most part, unfairly I believe--for
    being slow in making commitments and disbursements. Certainly, in a
    world of fast-disbursing emergency assistance and in which money not
    spent by September 30 is lost, it may be seem slow. But that is not the
    model or the lessons on which it was built, nor how it should be
    evaluated.
        Ultimately, both MCC and this legislation should be evaluated on
    the outcomes they achieve, and the progress their programs make toward
    their benchmarks. In the interim, other measures exist.
        In terms of the pace of its commitments, MCC compares favorably
    with other international aid institutions, even though it has slowed
    somewhat from its early days.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Similarly, benchmarks can be set for the pace of disbursements. It
    would be unreasonable in measuring the pilot's success to expect that
    100 percent of the funding for a 5-year program would be disbursed in
    the first year. In a fully functioning, steady state program, achieving
    a pace of 20 percent a year might be reasonable. However, allowing for
    initial start-up challenges, the time needed to decide objectives,
    prepare proposals, to evaluate them, and mobilize to implement them is
    likely to result in a disbursement pace will below that in the
    project's early years.
        Establishing this initial program as a demonstration project gives
    time for participants to come up the learning curve and to get start-up
    issues behind them. It allows them to educate constituents, and to
    manage expectations.
    In Closing
        The original MCC legislation was passed with bipartisan support,
    and with the support of many of your Senate colleagues who serve on the
    Foreign Relations Committee. I remember with appreciation and respect
    the support and knowledgeable assistance we received from many of them,
    including Senators Lugar and Biden--the Chair and Co-Chair of the
    Committee--Senators Feinstein, Coleman, Hagel, Dodd, Sununu, and
    others.
        You now have the opportunity to bring some of those same lessons
    and ideas here domestically, to address the same fundamental problems
    of helping people to escape poverty and achieve sustainable long-term
    growth--and to do so on a bipartisan basis. I hope that you will.
        Thank you.

        Senator Murkowski. Thank you, Mr. Applegarth, and all of
    you for your testimony. We certainly appreciate it here this
    morning, not only to give a little bit of background on the
    legislation itself and how it fits in with the Millennium
    Challenge Corporation, but also to understand from the local
    perspective what this might mean.
        Mr. Applegarth, let me start with you. Just to better
    understand how we might see direct application in Alaska. Mr.
    Crow had some very good testimony this morning about what we
    actually have within the bureaucracies that we have set up and
    the difficulty in moving the money between the agencies to
    allow for real, and complete economic development. And your
    point is that there needs to be a fundamental change in how we
    allow these programs to work.
        Given what Mr. Crow described, and the structures that we
    have within agencies, short of this legislation and this MCC
    approach, do you believe it is possible to do what Julie and
    the folks at AFN want to do in terms of economic development,
    short of this legislation?
        Mr. Applegarth. There are people here with more experience
    with that particular group of agencies than I have. There are
    certainly some good programs that are already existing, and
    some very well- intentioned professionals here in Washington.
    But, if you look at the world of international development,
    there are also very well-intentioned programs and some good,
    hard-working professionals. Insiders in the development
    community sometimes characterize their efforts as: People from
    a developed country, whether it is Washington or London, or
    Paris, come to a country and say, ``Hey, we are here to help,
    this is your problem, and we are going to fix it for you.'' And
    so professionals go for a while, they spend some money, and
    they leave. There is no capacity-building, and at the end of
    the day it is not clear that a lot has been accomplished except
    spending for consultants and other things. It is hard to see
    the real benefit on the people and really see a fundamental
    change in the lives of the people.
        This legislation, and these lessons on which it is based
    really turn that model on its head. It starts from which
    problem do the people in the affected area believe is their
    highest priority. And what is the best way to fix it? A compact
    under this program is a vote of confidence in the potential
    beneficiaries, in the people that are experiencing the problem
    on a day to day basis, and are they willing to sign up to take
    responsibility to get it done? While there is certainly a trust
    and verify element in this, you are shifting the responsibility
    out of Washington and putting it onto people on the ground. So
    they have to step up: say yes, we will take it, develop plans,
    explain what they are and how it is going to work, and then be
    willing to be tracked against it. You certainly still have high
    standards in terms of making sure the money is used well, but
    it really is a shift.
        Certainly a lot of developing countries don't qualify for
    this vote of confidence. MCC only takes, roughly, the top
    quartile of countries. Even before a country gets to talk to
    MCC, it wants to see its government is committed to the
    fundamental kind of policy environment that is important for
    growth.
        Senator Murkowski. Let me ask you, Senator Stevens raised
    this in his opening remarks, Alaska geographically is a
    challenge because it is so remote. You have very small villages
    that are very isolated and so the ability to build a stronger
    economy is very limited because of, primarily geographic
    factors. In your experience, in working with the Millennium
    Challenge Corporation, and how that came together, and
    recognizing the developing countries that you wanted to assist,
    are Alaska's issues much more unique than other countries that
    can avail themselves of the MCC? In other words, do we need to
    do anything different with Alaska because of our small,
    isolated population and the fact that you have very localized
    economies? Are there more similarities or more differences?
        Mr. Applegarth. Well, I think there are both. The reality
    is there are some 150 developing countries. They are widely
    diverse. The differences between Bangladesh and Cape Verde, for
    example, are vast. And I think that is part of the point, that
    you can't, in Washington or in a centralized donor country,
    make decisions of what is going to work in each situation. It
    is not a cookie cutter approach. That is why it is important to
    have the people at the local level who know the situation best
    driving the process.
        There are similarities--I can think right away of a
    couple--between the situation in Alaska and some other emerging
    economies, and there are opportunities for lessons learned. I
    think one of the many good things we did at Millennium
    Challenge was to encourage the people in each country
    responsible for program implementation to talk to each other.
    We would sponser group meetings and then suggest some topics of
    conversation. That would be the last thing we would say,
    because then everybody gets animated and talks among themselves
    and a real exchange of lessons. Encouraging this kind of dialog
    between the native program located in Alaska, and those in
    developing countries, would be one of the things we could do.
    To sum up I think there probably are some lessons that would be
    attributable to Alaska or Hawaii or the lower 48 in some other
    emerging markets that we could look closely at.
        I believe one of the advantages that Alaska has is the
    leadership provided by the BBNA and AVCP. They deal on a day to
    day basis with the local communities and making sure they are
    involved in the processes. I have had the opportunity to sit in
    some of the Council meetings and watch the process of debating
    resolutions and coming to a conclusion or not. And anybody who
    thinks that this rubber stamp process has another lesson
    coming. There is animated, active debate. Ralph and Zack and
    their colleagues must really have to have a thick skin
    sometimes. Because there is involved--I will put it this way--
    there is involved local ownership of the issue.
        Senator Murkowski. Let me ask the two of you, Ralph from
    BBNA's perspective, and from AVCP's perspective, it is one
    thing to know that you have a reliable funding stream, and I
    appreciate the benefits that that certainty yields. But it is
    also about what you can build in your region. Zack mentioned
    the poverty rates there in the area, the unemployment, the
    poverty, is as extreme there as anywhere in the Country. As you
    are sitting and dreaming about what you could do with this
    potential, how do you see a specific program developing out
    there that can provide for this level of economic development
    in an area that has just been historically--I don't want to say
    depressed--there is very little economic vitality in the region
    in many of those outlying villages.
        Mr. Brink. I think what we envision in this area is what
    will work. I can't say what will work in that area. They know
    what will work in their area. And I think what they were
    talking about is tourism. There are several individuals in the
    Yukon River that are trying that. So they are the ones that
    they know what will work and then we want to build on those. I
    am not from the Yukon, I am from the Kuskokwim area, and the
    Kuskokwim in summertime, the fishing and hunting networks that
    we have, that brings income to some individuals. In the Yukon,
    there is not a whole lot of that.
        So they will need to take the opportunity for them to try
    things that will enhance their lives.
        Senator Murkowski. What about out in the Bristol Bay area,
    Ralph?
        Mr. Anderson. Thank you, Senator. You know, over the past
    five years, we have been discussing this whole concept of how
    best we can meet our economic challenges and how can we help to
    move our people into the 21st century. Paul mentioned some
    things that I think were absolutely right on. One is that for
    many years we have lacked capacity-building from service
    providers. We would have government officials come swooping and
    say, hey, we are from the government and we are here to help.
    They might be there to take care of an emergency problem or
    some specific problem with funding ending on September 30, and
    then they are gone, with maybe a facility built or a service
    started without any local person left behind to do the actual
    maintenance in carrying out the project or carrying out the
    service.
        Being from the small village of Clarks Point, I grew up
    there. There are 60 people, and 30 of us were students, grade
    school students. And now the population is cut in half. There
    are now 30 people living there. Our school is barely being kept
    open. We are still above the 10 student threshold.
        We developed some concepts between us, between our groups,
    AVCP, BBNA and AFN. We started this a couple of years ago
    actually, when we had our first formal meeting between us on
    the project.
        There is also a really key component of the legislation
    that will help us to move along. There is a provision in there
    for planning because we need to know, and we would also like to
    find out from Millennium Challenge how the compacts are set up.
    We are familiar with compacting. We know how they operate. So
    we would also like to find out from Millennium Challenge just
    how they have their compacts set up and how they are
    administered and programs developed.
        There is also another component here where we need to teach
    a new agency, Commerce, the whole concept of compacting,
    because my understanding is that the only agency that I am
    aware of that compacts with Native tribes and Native Alaskans
    is the Department of Interior. Although there may be an
    Administration policy encouraging other DOI services to be
    compacted, we haven't seen any. So this is also helps us to
    expand the concept of compacting to other departments. So there
    is some planning that would need to occur.
        We have explored in the Bristol Bay region
    telecommunications possibilities, energy possibilities, but we
    also understand that in order to be successful, we need to go
    about implementing the project as carefully as possible,
    because we want to be successful. We don't want to set
    ourselves up to fail, because our success means that Native
    Americans, Native Alaskans throughout the State will also
    benefit. We will be opening doors for other opportunities for
    them as well. So we want to succeed.
        As far as specifics for the villages, and Zack was very
    accurate in saying that different areas have different needs.
    One of the things that we have seen in Bristol Bay and
    everywhere in Alaska is just the astronomical costs for energy.
    We are having people leave our region or leave our villages as
    well. At the same time, we are facing really poor economic
    conditions. How do we provide for families in the villages to
    buy heating fuel at $5 a gallon in the coldest winter months
    when it is 20 or 30 degrees below?
        Those are some of the challenges that we are facing. If you
    take a look at the $100 million over five years, and you count
    the number of eligible entities, we are not going to see $100
    million apiece. We are not going to see enough money to build
    roads, airports, and infrastructure with the costs the way they
    are. But we will be able to build companies to build roads and
    airports, to build infrastructure, to provide economic
    opportunities and jobs in our regions.
        We might not be able to provide some direct program
    services and facilities as a result of the legislation. If you
    divide $100 million by six, and that doesn't leave very much,
    if you are just doing the math. But we will be able to build
    the companies and build enterprises that would allow them to
    pursue other funding sources as well.
        Senator Murkowski. Let me ask you about that, Julie,
    because you mentioned that what you needed were the tools for
    competition, and whether the tools for competition are ensuring
    that you have high-speed Internet, basically the ability to
    communicate not only village to village, but around the globe.
        What else are you considering in terms of the tools for
    competition that are going to make the difference?
        Ms. Kitka. Well, we need an education component. We need
    more training money for workforce development. It is absolutely
    critical because if you are going to be moving towards more
    communication and knowledge economy on that, an educated
    workforce and an educated people and community is essential on
    that.
        So I would say that you need access to the high-speed
    Internet. You are going to need additional training and
    workforce development money that is able to be compacted, that
    people can really move not only a sizable number of people into
    greater and greater ability to use the communications and
    technologies, but also move people to the whole model of life-
    long learning.
        I think that that is really what you are saying in regard
    to how do you move our people to be more competitive in the
    world is to change the mind set. It is not really changing. It
    is just encouraging and making explicit that that is what life
    is about, is life-long learning, and getting people from where
    they are at to move forward and continue to develop.
        As I said, another aspect is what I have called changing
    the investment climate. We had an economic forum one time here
    a few years ago, and we had a speaker that does a lot of
    investing all around the world. We were talking about what the
    differences are in some of these countries and in Alaska, and
    they basically said the United States Government incentivizes
    us to invest in Brazil, in India, in China. The U.S. Government
    does that. And if you want us to invest in your State or your
    rural area, the government really has to take a look at what
    are its economic incentives and its climate that it provides to
    incentivize that.
        Senator Murkowski. Is that just at the Federal level or is
    it also at the State level?
        Ms. Kitka. I think it is both. One in particular I
    mentioned at the beginning of the testimony, the idea of
    additional demonstration projects. One which I have been
    particularly interested in is taking a look at what is going on
    the Middle East in the Arab countries, in particular Dubai and
    others, where they have created these free trade zones where
    companies can relocate there and they pay absolutely no taxes.
    They have areas there where they become magnets for all these
    world class universities to locate there, to provide world
    class education.
        These countries, when they are looking at how do they build
    sustainable economies and transition from oil economies to
    other ones to benefit their people and position themselves,
    they really are looking at education and expanding that, but
    also again this whole investment climate of how do you
    incentivize people to locate there.
        I really think it is really ripe for a national
    demonstration project on what we would call a free trade zone
    to try to incentivize business opportunities in Alaska, in
    Hawaii, and in the reservations.
        It may sound like it is just nothing but big thinking, but
    I think if you think in terms of the global economy and how
    things move so rapidly and how far the United States is falling
    behind in being competitive in the world, I really think that
    the Committee and the Congress really needs to take a look at
    how can each part of the Country gets its strategic edge and
    help us be more competitive in the global economy based on our
    strategic edge.
        When I think about Alaska in particular, I think our
    closeness to Asia and the Pacific and that whole rim, and the
    growth of those economies and what that means, our potential
    trade partners, I really see Alaska and our people and the
    people of the Pacific Northwest and California as being
    transition areas for that part of the world.
        Again, with some of these demonstration projects, you can
    test some of these things out. You don't have to make a full-
    blown total commitment, but you can test things out for a few
    years to say does this make a difference in making us more
    competitive; does this take advantage of our strategic
    competencies that we might have or our geographic location; and
    does this move us forward.
        I would argue that we are really far behind in doing that.
    That is why I am suggesting that even at this late time in this
    Congress on that, that we consider entertaining more
    demonstration projects and moving those forward, because I do
    think that we are falling behind more than we realize. We do
    need to catch up.
        Senator Murkowski. I appreciate your comments about the
    trade zones or the economic development centers where you do
    incentivize, whether it is educational institutions or some
    level of industry to come in. I think that that is important.
        I think that leads to the other initiative that you had
    indicated that you would hope to include as a demonstration
    project. This is the focus on energy resources. I am convinced
    that if we are not able to get our energy costs under control
    and have reliable, affordable clean energy available, it will
    be very, very difficult for us to be competitive in that global
    marketplace.
        The comments have been made today about what the high
    energy costs are doing to our villages, whether it is Clarks
    Point where you grew up, Ralph, where you are seeing people
    move out of the villages because of high energy costs. I think
    if we can focus on this as an area and figure out how we bring
    down our energy costs.
        I know you have had the conversation with the President of
    Iceland. We have seen how that country has been able to attract
    world business leaders to come locate in, again, a
    geographically remote country like Iceland, not because of the
    labor force there, but because there is affordable, reliable,
    clean energy sources.
        So I would hope that of the initiatives, as you try to
    advance this, that the energy piece is one that we are able to
    tackle. We have some initiatives that we are working with.
    NakNik is looking at how they might be able to bring on
    geothermal, not just for their community, but for the
    communities within that region, to be able to tie them into
    that. If you had an economic center where you did have an
    energy source that worked there, I think your possibilities are
    greatly expanded.
        I wanted to ask, Julie, you had mentioned some technical
    amendments that you would present to staff, just in terms of
    additions to the legislation. Are there any specifics to the
    technical amendments that we might want to know about?
        Ms. Kitka. The one technical amendment I would suggest
    would be a severability amendment that if anything is ruled
    unconstitutional, that it would be severed. I know that if you
    look at the Justice Department's concerns on the Hawaiians
    being included in that, AFN is absolutely totally behind the
    Hawaiians staying in this project, but if that helps overcome
    some of the concerns with Justice Department on the bill,
    having that severability if there is any reason why they
    shouldn't be on that, I think that that helps the bill go
    forward.
        Also, I was going to say in regard to, and I think that
    there was one technical amendment that was to in the other
    agencies on that make it more permissive for the agencies, as
    opposed to mandatory, so that you are building the cooperation
    of the agencies that are participating, contributing resources
    into Commerce, as opposed to hitting them over the head. So it
    was kind of like build up the mechanism and build up the
    attractiveness of that, and allow the ability to have
    negotiations and build positive things to make that happen, as
    opposed to it being viewed negatively. So I think those are the
    two there.
        And certainly if there was an interest in making explicit
    capturing best practices on that, I am sure that there is a
    technical amendment that could be developed on that.
        We also felt that there was something that could be done
    totally aside of legislation to try to help capture some of the
    best practices. That would be just basically maybe a letter or
    a request from this Committee to the Millennium Challenge,
    opening up that inquiry and saying we really would like to see
    this sharing take place. I think that when we went to meet with
    them, Ralph and many of us sat down for briefings over there on
    that. I think that there is a real willingness for people to
    share what is going on, but if we can formalize that somewhat
    and maybe, like I said, even a letter going over there
    expressing the interest of the Committee in making sure we
    capture some of these best practices, could get the ball going
    as well.
        Senator Murkowski. Which would be I think very important to
    be able to share that.
        We are going to have to wrap up here in just a few minutes.
        Is there anything further? Byron, I haven't directed a
    question at you this morning. Is there anything further that
    you wanted to add in terms of support or the initiatives as
    they may apply in Alaska?
        Mr. Mallot. Well, just based upon the testimony and
    discussion here, I would emphasize the notion of continuing to
    think about appropriate incentives. Senator Stevens mentioned
    that in his testimony.
        I think we also need ultimately to effect an attitudinal
    change about rural Alaska within our State, the notion that
    putting dollars into rural Alaska some how is a sunk cost,
    while building something in another place might be an
    investment.
        I also think that as we look at high energy costs, with
    what is happening with climate change, a more profound focus on
    the ultimate future of our rural communities and rural places
    in our State, and their importance not just to Alaska, but to
    the United States and to the world, as being places that we can
    learn and act and hopefully bring again best practices and
    lessons that can be applied elsewhere.
        My final comment would be that we know that high energy
    costs are bringing rural Alaska to its knees as we speak, that
    the out-migration is significant, and that the need to wrestle
    that 500 pound gorilla to the ground is absolutely necessary
    and vital. It is preaching to the choir, but it is something
    that very much needs to be emphasized and dealt with.
        So thank you very much for your leadership, Senator.
        Senator Murkowski. Well, we will work with you on all these
    issues. The energy one, I do believe, is the biggest hurdle we
    have now within certainly most parts of the State to real
    economic advancement. If the residents can't afford to continue
    to live there, that means they can't afford to continue to do
    any business there, and we do see that migration into town or
    elsewhere, leaving the State. That is something that we have to
    be able to get our arms around.
        Julie?
        Ms. Kitka. Madam Vice Chair, I neglected to extend our
    deepest thanks for the Indian Health Care Improvement Act
    getting done yesterday. I was meaning to do that, but I kind of
    jumped into our testimony. I think that that is really
    critically important that that happened. We are so pleased with
    that. We can hardly wait to get back home and share the news.
    That is a major accomplishment for the Senate. We want to thank
    you and Chairman Dorgan and all the staff people and all the
    members of the Congress that made that happen, because we know
    that that has been a long time coming and a lot of work, but we
    deeply appreciate it. It was very significant.
        Senator Murkowski. Well, I appreciate your kind words. When
    you think about the economic health of a region, regardless of
    where it is, whether it is Alaska, Hawaii or Bangladesh, we can
    work hard to create good, strong economies, but if you don't
    have healthy individuals, if you don't have healthy families,
    you simply do not have that strong economy that you need.
        And so I view the focus on the Indian Health Care
    Improvement Act as an integral part to how we bring about
    economic development and real economic stability within a
    region. We have to be able to provide for the health care
    needs, and as we know, we have to be able to provide for those
    health care needs out in those regions. I think that this Act
    goes a long way in helping to do that, so that along with
    education, along with job training, is the healthy individual.
    So we will continue to push on that.
        We will ask for your help on the House side in encouraging
    them to move it along so that we can actually get this one tied
    up this year. It is going to be very, very important to us.
        Gentlemen, anything further that you would care to add
    before we conclude?
        Paul?
        Mr. Applegarth. Senator, pardon me, when I mentioned the
    efforts of AVCP and BBNA, I failed to mention AFN and Julie and
    Nelson's efforts in helping to pull this legislation together,
    and in involving everybody in the local communities. I didn't
    want that oversight to be uncorrected.
        Since I have the floor, I also want to emphasize a couple
    of other things quickly. One is how quickly lessons learned
    spread. One of the things that we have seen is if you shift the
    responsibility to the people at the local level, the benefits
    of lessons learned spreads automatically. They take the
    initiative to call their counterparts elsewhere. It is not
    something that needs to be coordinated or planned in a forum.
        For example, I remember when the local coordinator of a MCC
    program in one of the African countries asked for a list of the
    other coordinators from their other countries. He got on the
    phone and called them, and said, what are you doing about this
    or that. MCC probably would have gotten that idea after a
    couple of months, but the reality is, it was happening well
    ahead of us. This is an example of the market working and
    ownership being taken, with individual participants who
    accomplish their own goals go out and do things.
        I also think new technologies offer us an opportunity to
    preserve life at the local villages in a way that some of us
    are just beginning to imagine. We are seeing about the power of
    distributed computing in terms of stay at home moms doing work
    or other kinds of things. There may be a way to apply similar
    concepts, and allow people to become economic powerhouses in
    their same village. They do not have to leave home, not have to
    spend the energy to commute somewhere else and so on, and still
    generate income and help preserve the traditional lifestyle.
        How this would work in practice, I don't yet know, but the
    reality is this kind of approach in this legislation allows
    those kinds of ideas to bubble up into proposals and to
    programs where other people can learn about it.
        Finally, it really is important that you have held the
    hearing today. Thank you very much for your own efforts.
        Senator Murkowski. Thank you.
        And I want to thank AFN, AVCP and BBNA for your efforts to
    work together, to coordinate. I greatly appreciate the interest
    of so many Alaskans that are here at the Committee today to
    listen to this. I think we are all looking at this as a new
    idea, an approach that is going to startle some, is going to
    scare some because it is not the norm. Sometimes you have to
    shake things up in order to change the way that things have
    happened for a long period of time.
        So again, I appreciate the leadership and the ingenuity of
    so many of you that have brought us to this point. We will be
    working on it on this end, and again thank you. I appreciate
    the fact that you have traveled some great distances to be
    here, and I look forward to working with you. Thank you.
        With that, this hearing is adjourned.
        [Whereupon, at 11:25 a.m., the Committee was adjourned.]

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