[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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                      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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