<html><body><P>American Enterprise Institute</P> <P>January 7, 2009</P> <P>[Edited transcript from audio tapes]</P> <P> </P> <P></P> <P> <TABLE cellSpacing=1 cellPadding=1 width="100%" border=0> <TBODY> <TR> <TD> <DIV class=BodyText>8:30 a.m.</DIV></TD> <TD> <DIV class=BodyText>Registration and Breakfast</DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>9:00  </DIV></TD> <TD> <DIV class=BodyText><EM>Panel:</EM> </DIV></TD> <TD> <DIV class=BodyText> Global Health: Is PEPFAR Sustainable?</DIV></TD></TR></TBODY></TABLE></P> <P>The President s Emergency Plan for AIDS Relief (PEPFAR), a capstone of U.S. global health policy, has won bipartisan praise as one of President George W. Bush s most successful programs for the developing world. In addition to providing treatment for more than 2 million HIV/AIDS patients and preventative education for millions more, it has generated significant diplomatic benefits for the United States. Yet the program carries a $50 billion price tag. Is PEPFAR sustainable, and how effective is the current allocation of funds? Mark Dybul, the U.S. global AIDS coordinator, will deliver a keynote address.</P> <P> <TABLE cellSpacing=1 cellPadding=1 width="100%" border=0> <TBODY> <TR> <TD> <DIV class=BodyText><EM></EM> </DIV></TD> <TD> <DIV class=BodyText><EM>Keynote Address:</EM></DIV></TD> <TD> <DIV class=BodyText>Mark Dybul, U.S. State Department </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Panelists:</EM> </DIV></TD> <TD> <DIV class=BodyText>Mead Over, Center for Global Development</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> <P>Richard Tren, Africa Fighting Malaria</P></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Moderator:</EM> </DIV></TD> <TD> <DIV class=BodyText> <P><A class=eResources href="http://www.aei.org/scholars/scholarID.76/scholar.asp">Roger Bate</A>, AEI</P></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>10:30  </DIV></TD> <TD> <DIV class=BodyText><EM>Roundtable Discussion:</EM></DIV></TD> <TD> <DIV class=BodyText>Entrepreneurial Philanthropy</DIV></TD></TR></TBODY></TABLE></P> <P>In 2006, American individuals and organizations gave more than $34 billion in private philanthropy to the developing world $10 billion more than official development aid. An increasing number of development practitioners are focusing on strengthening entrepreneurial approaches to development. In this session, an accomplished group of experts, practitioners, and donors will discuss and debate the role of this growing form of aid and what it means for the United States.  </P> <P> <TABLE cellSpacing=1 cellPadding=1 width="100%" border=0> <TBODY> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Opening Remarks:</EM> </DIV></TD> <TD> <DIV class=BodyText> Michael Fairbanks, S.E.VEN Fund</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Discussants:</EM> </DIV></TD> <TD> <DIV class=BodyText>Carol Adelman, Hudson Institute</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>William Inboden, Legatum Institute</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>John Orrison, BNSF Railway</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Kim Tan, SpringHill Management</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Moderator: </EM></DIV></TD> <TD> <DIV class=BodyText>Arthur C. Brooks, AEI</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>12:00 p.m.</DIV></TD> <TD> <DIV class=BodyText>Luncheon</DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>12:30  </DIV></TD> <TD> <DIV class=BodyText><EM>Exercise:</EM></DIV></TD> <TD> <DIV class=BodyText>Security and Development</DIV></TD></TR></TBODY></TABLE></P> <P>The global Long War against terror increasingly blurs the line between military and economic action. American success in volatile regions across the developing world depends not only on alleviating tensions but also on preventing them. But U.S. military and economic presence abroad has all too often been plagued by bureaucratic infighting and poor interagency coordination. An alternative strategy is to devolve more power to on-the-ground country teams, led by chiefs-of-mission who oversee U.S. military, diplomatic, and economic actions in-country. In this public exercise, AEI s Thomas Donnelly and a team of military, diplomatic, and economic experts will simulate the decision-making process of a U.S. country team in Nigeria exhibiting how a threat can be diffused before it becomes a crisis. </P> <P> <TABLE cellSpacing=1 cellPadding=1 width="100%" border=0> <TBODY> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Participants:</DIV></TD> <TD> <DIV class=BodyText>Lawrence Crandall, U.S. Foreign Service (Retired)</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Mauro De Lorenzo, AEI</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Jamelle McCampbell, U.S. Department of Defense</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Samantha Ravich, National Strategy Information Center</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Colonel Robert Killebrew, U.S. Army (Retired)</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Paul Wolfowitz, AEI</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Moderator:</DIV></TD> <TD>Thomas Donnelly, AEI</TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>2:00</DIV></TD> <TD>Adjournment</TD> <TD> <DIV class=BodyText> </DIV></TD></TR></TBODY></TABLE></P> <P> </P> <P>Proceedings:</P> <P>Global Health: Is PEPFAR Sustainable?</P> <P>Roger Bate:  Thank you very much for making it in.  I m not Mark Dybul.  Mark Dybul is sitting here.  My name is Roger Bate.  I m a resident fellow here at the American Enterprise Institute.  And thank you very much for making it down on such a miserable morning.  I cycled in this morning and it was quite entertaining.  I m a resident fellow here and I think, appropriately enough, given the topic we are discussing this morning, I work on international health policy.  Before I begin, given the feedback problems we had yesterday - actually, that is irrelevant to what I m about to say - can you please put your cell phones to vibrate or turn them off so that the speakers are not interrupted?  </P> <P> U.S. private entities and taxpayer funded efforts to combat HIV, malaria and tuberculosis have been unprecedented in expenditure and scope over the past five or six years.  While others have talked about massive spending on HIV prevention and treatment, bed net distribution and insecticide spraying and applying DOTS Program for TB, the U.S. government under the President s Emergency Plan for AIDS Relief, the President s Malaria Initiative and other initiative have actually spent the money.  From a humanitarian perspective this has been a great intervention, one that the Bush administration has rightly talked of as a significant contribution.  Many outsiders would say it is his best contribution.  </P> <P> But it has also provided for us who monitor health AIDS spending and particularly who monitor disease control, it has also provided great learning opportunities, because enacting the programs that the U.S. government has done over the last five or six years has enabled us to attempt to answer questions, some of which are easy and some which are less so, questions such as: Have lives been saved by the programs?  Have they provided the best bang for the buck?  Are they the right allocation of resources, not only to combat HIV but more broadly in the general health setting?  And more broadly, are they the right allocation if you are looking at your entirety of development aid spending?  Does such spending undermine the relationship between local governments and the taxpayer base?  </P> <P> It also draws us new questions as in the title of today s discussion, Is PEPFAR Sustainable?   So I am particularly delighted that Ambassador Dybul, one of the more convivial, stylish, intelligent and charming members of the administration who coordinates the U.S. government s spending, most of the spending in this area is our keynote speaker to kick us off this morning.  His resume, like that all of the other speakers, is in the packs so I will not go through it - I am assuming you can all read - but other than to say I did not realize you are a rear admiral.  Congratulations!  I had no idea we are in such august presence.  He will be talking about the many achievements of PEPFAR and set out the discussion to follow, but as I said I m particularly pleased that he is going to stay till the end so that he can be an active participant, respond to the respondents if you like and also to engage with our burgeoning audience here.  I am sure people will continue to trickle in.  </P> <P> We have two super respondents both from NGOs that I like very much, one I used to run with Richard that is.  First, will come Mead Over who has a wealth of multilateral experience, two decades no less at the World Bank and who is now a senior fellow at the Center for Global Development, and Richard Tren who has years of experience working in a country, in a region which has high rates of the disease on discussion today.  He was South African director of Africa Fighting Malaria and is now a director here in Washington D.C.  So without further ado, Mark Dybul.</P> <P> Mark Dybul:  Thank you very much, Roger, and good morning everyone.  I would like to thank AEI for hosting this.  Of course this is a great time to be talking about is PEPFAR sustainable as we move into new administration with a lot of energy.  Two leaders who have been very supportive of development programs, President-elect Obama and Vice President-elect Biden are really dedicated to these issues.  For those who do not know, the President-elect co-sponsored our reauthorizing legislation; the Vice President-elect was the floor manager.  PEPFAR II would not exist without either one of them, and so it is a good time to talk about these issues and particular in light of the current global situation economically and our current domestic economic situation of how sustainable are these programs.  </P> <P>I just want to talk briefly about PEPFAR itself and then talk about some bigger issues and then address is PEPFAR sustainable on three levels.  I think most people in the room know PEPFAR is the largest international health initiative in history dedicated for a single disease - that is rather an extraordinary thing - and it was dedicated for HIV and we will come back to that in a little bit.  But I want to talk a little bit about the initiative itself about how we got to that initiative.  </P> <P>Before we get to that I want to just briefly touch on some of the remarkable successes of the program.  I actually did not realize there were slides or we were going to have them, or I would have brought them because I think some of the graphs are remarkable, particularly for the U.S. government.  We set goals, the President set goals five years ago.  He set goals of supporting treatment for 2 million people, supporting care for 10 million people globally and supporting the prevention of 7 million infections by 2010.  Those treatment and care goals, infection-diverted goals are rather remarkable if you think about where we were.  There were 50,000 people in Sub-Saharan Africa receiving treatment when this program began - 50,000 - so 2 million was awfully aggressive.  That 7 million infections averted was actually 60 percent reduction of projected new infections in 15 focus countries.  And those countries had half the disease in the world and still do have half the disease in the world.  That is pretty remarkable, too - 15 countries have half the disease in the world.  And that 10 million in care is both HIV positive people and orphans and vulnerable children.  I will talk about that.  </P> <P>The President announced on World AIDS Day, December 1 of this past year, that we met the goals and we met them early and we met them on budget.  All of those things are not common for a government, but perhaps more remarkable - and this is why I wanted to show the slide - five years ago we set annual goals.  Unlike in most of development where you just had a long term goal and hope somehow you get there, we took a business model of you actually have to achieve intermediate benchmarks to get to those final goals.  So we set annual goals.  We met every annual goal, not just the final goal except the first year.  So it was an excellent business model for how you do development and I want to come back to that in just a little bit.  </P> <P>The prevention goal is a 2010 goal but we have evidence that we are getting there.  Part of it is prevention of mother-to-child transmission.  For those of you who remember, the President actually launched the prevention of mother-to-child HIV before the larger PEPFAR initiative.  Eleven of the 15 countries, they were the same focus countries, met the goal for that initiative as well.  A little bit behind but 11 of the 15 meant that it meted in over 200,000; about 230,000 infants have been born without HIV estimated through the program.</P> <P>One thing people are not looking at as we look at the overall trends of infection is in Sub-Saharan Africa, the trends looked pretty good except for a couple of countries.  Most countries have stabilized or declining epidemics, and so we think we actually are on track to achieve that reduction in new infections.  Recently we have reported that Namibia had a 50 percent reduction in infection prevalence in 15- to 25-year-olds - unbelievable - over the last five years.  And Kenya had a 30 percent reduction, Zimbabwe a 23 percent reduction.  So we are a seeing a rather remarkable data in terms of infection rate as well, and that is something that is overlooked partially because globally we are not seeing that decline because Eastern Europe and parts of Asia are expanding and therefore clouding what is happening in Sub-Saharan Africa.  </P> <P>I think it is safe to say that even the harshest critics of the administration have viewed this program and what has been done in development in a very positive light.  Eleanor Clift, hardly a huge fan of the administration, asked again this year what is the single best taxpayers dollars spent two years in a row said PEPFAR.  And that is just an example of what we see over and over again.  </P> <P>I personally believe President Bush deserves the Nobel Prize for what he has done.  Had anyone else launched the largest international health initiative in history and achieved this success and began to turn the tide against the disease like this, they will receive a Nobel Prize immediately.  I hope the committee views things that way as well.  </P> <P>But I would like to put things in a larger context because that is what we are talking about, the sustainability of this program and in fact all of development.  I actually like to talk about all of development, not just PEPFAR to some degree, because the President has done something rather remarkable for all development.  While PEPFAR is the largest of the programs, he has tripled development - with strong bipartisan support I would say - quadrupled it for Africa, doubled it for Latin America.  This does not even include massive debt relief, a doubling of trade for Africa, and in the end economic growth and trade is how we are going to have true development.  It is the largest increase in development since the Marshall Plan which is rather extraordinary.  </P> <P>And that is the picture we are really talking about.  I am going to talk a lot about PEPFAR but we need to discuss, overall, is this development increase sustainable?  And Roger mentioned the President s Malarial Initiative, there is also the Millennium Challenge Corporation, the Africa Education Initiative, the Women s Empowerment and Justice Initiative.  The list of new approaches to expand development is rather significant.  So I wanted to address the sustainability of issue from three perspectives.  One is the principles: Are the principles that have led to this growth and development sustainable?  Why should it be sustained because it is not going to be sustainable if we do not make the effective arguments?  And then third, resources and how are we going to deal with the resource issues particularly in the current environment.  </P> <P>On the first issue are the principles.  We actually believe this is the most important piece.  We actually, as the President has called it, have launched a new era in development.  The President has led it but we have had a strong bipartisan support and it is a fundamental shift in the principles that underpin how we do development.  In our view, maintaining and sustaining those principles is far more important that sustaining individual initiatives.  So I wanted to talk a little bit about this new era in development and a little bit about the principles that underpin what has been done over the last eight years.  Another one of our less admiring sources out there is the New York Times.  They actually referred to what we are doing as a philosophical revolution.  I think that is appropriate.  This is a philosophical revolution on how we have approached development.  </P> <P>The principles of it were actually outlined in the Monterey Consensus which, for those of you who are interested in this area, really ought to be read.  It is only a three- or four-page document.  The city was Monterey in Mexico; it is not California.  While it is a couple of pages of a number of different paragraphs, it really comes down to four principles which really shifted how we approach development.  </P> <P>The first is country ownership.  The first and preeminent is country ownership.  To move past the paternalistic approach of the past of donors and recipients, to really behave in a full partnership because that is how you are going to have development.  The history of development in my view is mostly one of Cold War or postcolonial guilt and there you do not really care what results are, you do not really have partnership, you really are in donors and recipients, and the change has really been to push for country ownership because in the end, that is the only way to think that is going to be sustainable.  </P> <P>Now beneath that are a couple of things that need to occur and this was on the Monterey Consensus.  Good governance, you cannot have good country ownership without good governance.  Result-based approaches - you have to actually set targets and meet them and build a culture of accountability which we have not had in development.  All sectors being engaged.  We are not going to have true development in countries if it is government-to-government only.  It has to be people-to-people which include all sectors, non-governmental organizations, faith community-based organizations, and importantly the private sector which has largely been ignored by the development infrastructure for many, many years.  And in the end as the Monterey Consensus argued and pushed for, economic development will be the engine that drives full development, and so these are the principles that we have pushed.  If we sustain these principles, I think it does not matter about the individual initiatives.  </P> <P>While it was not international consensus, we got a lot of push back almost on a monthly basis around different pieces of that original consensus and people have been trying to roll some of them back.  If we stick to these principles which are the fundamental principles we believe for how you have effective development, if we sustain these principles, if we sustain these new era of development, we will have successful development.  So that was the first topic: Are the principles sustainable?  I believe they are, and I believe they are because we have been shown tremendous success in them as have others.  </P> <P>The second topic I wanted to address is why PEPFAR should be sustained and in a similar sense why should other development programs be sustained?  But I wanted to talk specifically about PEPFAR and global HIV/AIDS because there is a lot of debate out there in the public domain right now.  I m going to focus on Africa because most of what I m going to say relates to Africa.</P> <P>Two thirds of the disease in the world is still in Africa.  It is the place where AIDS is having a major impact on development.  You can argue in it is in other places, particularly countries in Asia, some countries in the Caribbean, but it is Africa really where this is a predominant problem.  Where in some countries 20 to 30 percent of the adult population is infected, I have been in districts where 75 percent of pregnant women are infected.  Seventy-five percent of pregnant women.  So these are the places where there is a clear link, in my view anyway, between development and economic growth and full development for a country and where HIV can truly undermine that.  So I m going to leave out most of the rest of the world the third of where the disease is, and then we can have a discussion of some one or two about those topics.</P> <P>So why did the President launch the largest international health initiative in history for a single disease, for one disease, HIV/AIDS, and why was most of it dedicated to Africa?  Ninety percent of our resources for focus countries go to Africa.  The reason is that link between ultimate development and HIV/AIDS.  HIV/AIDS is unlike most diseases.  TB is a little bit different but malaria, cancer, hypertension, heart disease, most are diseases that affect the very young and the very old.  Now that is a terrible thing.  No one wants to see young children die.  No one wants to see their parents or grandparents die, older grandparents or grandparents.  But for a developmental perspective, HIV is unique because it kills 15- to 45- to 50-year-olds which means it is knocking out in these countries a generation of parents, teachers, peacekeepers, healthcare workers, and that undermines your ability to development overall and that is one of the reasons we focused on it.  </P> <P>So the other piece about HIV which is largely ignored and they are actually going to push to say HIV is the disease of the very poor, it is not a disease of the very poor.  All studies, whether it is Africa, Asia, Eastern Europe, show that HIV/AIDS is a disease of people who have climbed a couple of rungs up the economic ladder.  People with a little resource, whether it is healthcare workers, whether it is workers, factory workers and others, whether it is healthcare workers, teachers, these are the people disproportionally infected by HIV.  I am going to talk a little bit about how that impacts our overall ability to advance development.  </P> <P>So let us move to that, how HIV/AIDS in Africa and in particular the hardest hit countries impacts our overall ability to achieve any development goals.  And let us look at the Millennium Development Goals because for most people those are internationally agreed to.  </P> <P>So let us look at education first.  Education, I think many people in this room would agree and certainly the administration believes is one of the most elements to long-term development.  If you do not have an educated population, you cannot innovate, you cannot create, you do not have any hope for the next generation.  HIV affects education in two ways.  One is the impact on teachers.  Teachers are disproportionally infected with HIV.  In Zambia, 2/3 of new teachers are dying from HIV/AIDS.  Now, you can set whatever Millennium Development Goal you want for education.  If 2/3 of your new teachers are dying, you are never going to achieve it.  </P> <P>The other important aspect is parents.  Parents die from HIV/AIDS because 15- to 45-year-olds are infected and we know kids without parents, whether it is one or both, have a very low likelihood of attending school, and in fact I m going to address that a little bit on healthcare.  They have a pretty low probability of surviving.  So we are not going to achieve education Millennium Development goals in hardest hit countries unless we tackle HIV/AIDS.  </P> <P>Let us look at healthcare because I think that is the clearest and easiest link and, as I think, three of the Millennium Development Goals are related to healthcare.  HIV impacts our ability to tackle general healthcare, not just HIV/AIDS, in a number of ways.  One is first of all and very importantly, HIV is the leading cause of death in Sub-Saharan Africa.  It is pretty remarkable.  It is the leading cause of death in Sub-Saharan African.  So if you do not tackle the leading cause of death, you are going to have trouble impacting any healthcare which I will get to momentarily.  </P> <P>The other is, and I think this is very important and something it took a while to recognize - I was one of the first to use the term - this is the first time in the history of development we are tackling a chronic disease.  It is pretty remarkable.  First time we are tackling a chronic disease.  You can do malaria.  You can do tuberculosis.  You can do vaccines without building a healthcare infrastructure because you can get in and out.  You can literally do something easily.  You can send a bunch of Northerners in, you can tackle things in a different way.  To tackle HIV prevention, care, and treatment, you need life-long services, including for prevention, and that means you have to build a healthcare infrastructure.  </P> <P>So despite all the arguments about how some vertical programs are undermining health systems, this is the first time we have actually attacked a disease where you have to build a health system and that is going to have an impact, and we can talk about that more in the discussion.  We are already seeing an impact of intervention on HIV on an overall health system.  But HIV itself limits our ability to strengthen that health system.  So we talked about the fact that HIV preferentially kills people that climbed a couple of rungs on the economic ladder.  Healthcare workers are probably one of the most devastatingly affected and if you are knocking out your healthcare workers, you are going to have a real tough time advancing any healthcare in already weakened systems.  </P> <P>In Kenya, there is a 50 percent higher rate of HIV infection in healthcare workers than on the general population.  In Zambia, 38 percent of loss of healthcare workers to the system is from HIV/AIDS.  In Swaziland, they lose four percent of their nurses every year - four percent of their nurses - to HIV/AIDS.  Now if you do not reverse the infection rate and death in the healthcare workers in already very fragile health worker systems and human healthcare capacity, you have a very little chance of tackling any Millennium Development Goals, expanding health systems, and tackling virtually any health system and any health initiative.  </P> <P>I also think it is important to look at where the data are.  So I mentioned we are building chronic healthcare systems which are having an impact not only on HIV/AIDS but on family planning, on antenatal care, on surveillance for syphilis, and this has been demonstrated by a number of studies; although, we need a lot more of data I would have to say.  But I think the most remarkable thing is we look at basic health indicators - life expectancy and infant mortality.  </P> <P>So look at Botswana, one of those heavily impacted countries.  After 50 years of public health gains, 50 years of reductions in infant mortality and increases in life expectancy, for about two decades, they saw a dramatic decline.  They saw a decline of about 30, 40 percent in life expectancy.  So in the face of other diseases, water-borne and all the other diseases we talked about, people had done pretty well in most of Sub-Saharan Africa.  They have increased their life expectancy by decades.  One disease reversed all of that and that was HIV/AIDS.  </P> <P>As Botswana began investing in HIV/AIDS, and I would have brought slides, you could see the remarkable correlation between increase in resources for HIV/AIDS and changes.  For the first time in decades, they had seen a significant increase in life expectancy and a decline in infant mortality.  Now why a decline in infant mortality?  Life expectancy makes sense that a lot of adults are dying.  Why infant mortality?  Two reasons: One, a lot of kids were actually getting infected from their mothers.  When you have, in some districts, 75 percent of mothers infected, they are going to transmit the virus to their kids and the kids are going to die, most of them, within two years.  The other reason is the parents were dying and I think this is a critical issue.  When parents die, kids have a three- to 10-fold increase rate of death from any cause, not from HIV/AIDS because the parents are not around.  In an economically challenged environment, without a parent it is pretty hard to be fed; it is pretty hard to go to school; it is pretty hard to survive.  </P> <P>I think this is why we saw in Uganda, when HIV interventions occurred in rural Uganda, we saw an 80 percent reduction in mortality among adults.  But we saw an 80 percent reduction in infant mortality in the same households and that is probably because we saw a 92 percent reduction in orphanhood.  By keeping the parents alive and by limiting the transmission from mothers to children, you actually decrease infant mortality.  In the highest hit countries, this is pretty important.  That is why in the highest hit countries, we are starting to see increases in life expectancy and decreases in infant mortality.  So if you just want to look at health overall in Sub-Saharan African, those are pretty good health indicators and they are changing because of intervention on HIV/AIDS.  </P> <P>The last thing I wanted to talk about is economic issues because HIV/AIDS does have an impact on the economic ability of countries.  Probably we did overestimate that impact in the last 10 years, some of that because we also overestimated the number of infections and some of that was just the models were not particularly good.  But in some countries we do see, it is hard to argue South Africa has not had economic growth because of HIV/AIDS.  But they probably could have grown faster and there are data now from individual companies on increased productivity when you intervene on HIV/AIDS.  I think if you think for the long term when you start thinking about impact on education and other fundamental systems in healthcare, it is not too hard to make a correlation, but it is probably not as tight as we once thought it was and it is probably not as significant as it once was.  But it will probably take more time to look at that.</P> <P>Unfortunately, you are measuring a negative.  It is like measuring an infection not occurring and you are measuring a negative impact but we still do see some impact on that, and I think it is important to think about that, which is why I wanted to get to the next topic, which is the impact of HIV/AIDS on global security.  Now, usually when people start talking about that, everyone kind of cringes and say, Oh, this is kind of Washington monument syndrome and you are just trying to come up with a justification for a reason for resources.   I think there is a real risk of that.  We need to be careful.  But I also think it is very real and pretty serious people have talked about it, and again this is Africa.  Gen. Wald, who is the four-star general who served under Gen. Jones because Africa had been handled by the European command - Gen. Jones, of course, is now the National Security Adviser designate.  Gen. Wald said that the three greatest threats to global security particularly on the continent of Africa are weapons of mass destruction, terrorism, and HIV/AIDS.  Gen. Jones has not gone that far but he has talked about the significant impact on security from HIV/AIDS on the continent of Africa.  Sec. Gates certainly talks frequently about development and its impact on security overall.  </P> <P>Now, why do people say things like this?  Why did the UN General Assembly have only one special session on a single disease on HIV/AIDS and why do they talk about the security of HIV/AIDS.  There are three fundamental reasons, one the UN did not care about was important to us.  One is the impact of hopelessness and that is a pretty squishy thing so I want to talk about it a little bit, but hopelessness and the link to potential harm, global harm and instability.  The second is the direct impact on peacekeepers and this one is pretty easy to me, and the third is specific things to the United States and why it is important for a security. </P> <P>Let us talk about hopelessness first.  This is a pretty squishy thing.  But I think it is important to think about it and this is the type of thing that Sec. Gates, Gen. Jones, Gen. Wald, the UN General Assembly has talked about and it gets back to who dies from HIV/AIDS, 15- to 50-year-olds, and that impact on the overall environment and the impact on losing a generation of parents and teachers and healthcare workers and peacekeepers and others, and the long-term impact of tearing apart a social fabric and hopelessness.  And hopelessness is a breeding ground for radicalism and HIV/AIDS in the hardest hit countries, unquestionably, you can look at the numbers that anyone who has been to these regions or within these regions five years ago sees the hopelessness that is there.  </P> <P>And the link to healthcare, healthcare is also one of the clearest things a leader can do to intervene in a clear way to change the dynamic, can begin to reverse that.  I have seen it in person.  Presidents of countries in Africa tell me about these links.  Heads of clinics tell me about these links.  </P> <P>I do not know if any of you have been following it but there is a fascinating new field with not a lot of data.  I think it is going to be a very interesting one on the economics of hopelessness, that someone without any hope for being alive in five years is highly unlikely to pursue an education.  A father is highly unlikely to get himself tested for HIV/AIDS or pursue a job if he thinks he is going to die.  Parents are highly unlikely to pursue environments and opportunities if they do not think they are going to be alive in five years.  And while there is not a lot of data on this, I think it is very important we start to look at that because in our current world that means a lot.  It is the equivalent of consumer confidence.  Consumer confidence is pretty squishy, too, but it will destroy a global economy just as confidence at a local level and the ability and hope for life in the next five years could begin to effectively be like consumer confidence for development.  </P> <P>So I think these are very important issues.  I do not think the verdict is in but it is something to very much be cognizant of, to think about and to look at, and probably to study quite a bit more.  Because if the last couple of months have taught us anything, and this is why I think we can make an even stronger argument for development, is that we are linked.  We are linked globally, economically.  Political stability is linked globally right now.  We are in a global, global world far more than when we did the Marshall Plan.  And so we need to think about that as we think about HIV/AIDS and its role in development and its role in national security.  </P> <P>The second topic on security, I think, is a clearer one which is the impact on peacekeepers.  Thirty-seven percent of UN peacekeepers right now are African.  Anyone who reads the papers in the last couple of months knows that Africa is an area right now that needs even more peacekeepers.  Peacekeepers are directly impacted by HIV for two reasons.  One, they go out in their peacekeeping missions and engage in activity which increases the rate of HIV, then they bring it back home and there is this vicious cycle of spreading HIV.  </P> <P>The second is they are not very healthy when they have HIV.  So it has been published and known that when certain countries have tried to field battalions of healthy peacekeepers, they have to go to two or three battalions to get one healthy battalion because the military is far more impacted, generally two to three times the level of the general population.  So the impact on peacekeepers is very real and our four-star generals who have worked in Africa see that impact and see why we need to tackle the epidemic.  It is not very surprising that when South Africa first intervened on HIV treatment was in the military.  When Uganda first intervened in HIV/AIDS, it was in the military and this is seen over and over and over again in countries. </P> <P>The third thing I wanted to just mention briefly is U.S. specific issues on national security.  For those of you who have been following the Pew and other international polls, I do not think it is a great surprise that 8 out of the 10 of the countries with the highest approval rating of the United States, in fact some of them with higher approval ratings than Americans have of the United States are in Sub-Saharan Africa.  The other two are Israel and the United States.  That is not overly surprising to those of us who spent time there.  </P> <P>I had the privilege of being with President Bush when he traveled to Tanzania.  The outpouring of affection for the American people was extraordinary and the reason for it was very clear that direct link to health and improving hope in communities.  They had billboards all over the city saying, Thank you for what you are doing on HIV/AIDS.  Thank you for what you are doing on malaria.  We believe in good governance because of the Millennium Challenge Corporation.  Welcome home! </P> <P>When I was in rural Ethiopia, at a clinic literally in a town that in the morning looked like 700 years ago, when you wake up and the mist is over it, you cannot see the power lines, everyone in white, Muslim walking with their camels going to either morning prayers or to the market.  We were in the only clinic in that place.  The head of the clinic happened to be a town elder.  If you are in a town like that, the head of the clinic is an elder and he started talking about PEPFAR.  And being a snotty Westerner, I asked him, What is PEPFAR?   Expecting him to say, The President s Emergency Plan for AIDS Relief, he said, PEPFAR means the American people care about us.   It is a pretty extraordinary statement in rural Ethiopia.</P> <P>In rural Namibia, Rehoboth, one of the poorest parts of Namibia, a brilliant young physician, a Namibian, gave a PowerPoint presentation - we do not even have them here.  He gave a brilliant PowerPoint presentation on what he was doing in his clinic, how he was looking at data, how he was improving lives, what he was doing to strengthen -- it was brilliant.  It was one of the most impressive things I have ever seen.  His last slide said, God Bless America. </P> <P>So the impact of how people look at us is rather extraordinary.  People know what we stand for when we stand with them and it is radically changing their views.  Those of you who know Namibia know how Namibia felt about us five years ago, six years ago, seven years ago.  That has radically changed because of these interventions and that is good for our national security.</P> <P>And this is very squishy but I think it is real, something that President Bush talks about.  These initiatives are good for our national soul and our national conscience and how we think about things.  The principles of these development initiatives are our founding principles, the dignity and worth of every human life with the logical corollary that everyone deserves a chance.  No matter where you are, everyone deserves a chance, that we have the right to the opportunity for life, liberty and opportunity.  And that is what these initiatives are all about.  And by promoting them and talking about them in national discourse, we actually strengthen who we are as a people.  Now that is even squishier than hopelessness, but I think it is real and I think it is something to think about as we think about the sustainability of these initiatives.</P> <P>So I would argue and I think we need to be making this argument more and more, that like the Marshall Plan - and this is the largest initiative to enhance development since the Marshall Plan - what we are doing has a strong humanitarian base but has very much enlightened self-interest, very much enlightened self-interest.  And those of you who are familiar with the Marshall Plan know very well that those were the foundations of the Marshall Plan.  It was very humanitarian, looking at a ravaged Europe, but it was also very much in our self-interest.  We knew we could not have economic growth.  We knew we could not do well in the coming decades if there was no vibrant Europe.  It is not too dissimilar now.  Many people would argue, and I certainly would, that Africa is the greatest potential for economic growth, it has great potential for market places and, again, we are far more tied globally than we were in 1947.  And so I think we need to be talking about humanitarian concerns and enlightened self-interest if we are going to be sustainable, which gets me to resources.</P> <P>Sustainability and development will depend on us making that argument - on effectively making that argument - which means we need more data.  But I think we also need to look at what sustainability and development mean.  Some people talk about and expect economic independence from the countries in a couple of years, where Ethiopia will pick up the $350 million we are providing them for HIV/AIDS next year in a couple of years.  That is not going to happen.  What sustainability to us means is getting back to those principles, the sustaining principles, including country ownership, that within a time period, five to 10 years, the countries are completely managing their programs.  And it gets back to that philosophical revolution, that complete shift, moving away from donors and recipients to partners.  And the leaders of countries recognize the shift.</P> <P>President Kagame talked about how now someone is actually taking them seriously, holding them to high standards, expecting them to do the work.  We will provide the resources but they have to do the programs, they have to create the country ownership and leadership.  And he said that has changed everything.  They view things in a different way and they view us in a different way because we are treating them as adults.  We are treating them as full partners and saying how do we work together, how do we support your programs.  President after president in countries talk about how this is changing, how they manage their countries.</P> <P>And in PEPFAR in particular, we are taking it to the next level through partnership compacts where we are saying we are going to go work with countries that want to tackle their epidemic.  We are not just going to say where we are going to put the money and where we are going to achieve the goals.  Where do we want to work with you, which means how are you going to tackle your epidemic, what resources are you going to commit, what policy changes are you going to make so that we can support your programs to be the most effective.  And that shift, that pushing of country ownership will lead to far more sustainable development and I believe will lead to ultimate development and resources available from this country because we are changing the model.  Taxpayers are willing to be compassionate and generous if they get something for it, but we are also going to be pushing the countries and they will be pushing us in a more accountable way.</P> <P>And so in conclusion, I do believe these programs are sustainable.  I believe the principles are sustainable and must be sustainable, that PEPFAR in particular and HIV/AIDS in particular is important, that resources will be there but we are going to have to make those arguments, we are going to have to have the data, and the countries are going to have to produce, which they are, and that will drive everything.</P> <P>Four quick things I think we can do to improve this.  One is structural, if we have one account, one budgetary account for national security that includes development, we will have a much better chance at having development resources.  But that requires us to be making those self-interested arguments that require us to make the national security argument better.  Now this is going to be a tough slog.  Just think about the number of committees that need to cross over to do something like this.  But there is an opportunity to think this way.  These are the things Secretary Gates and others have been talking about.  But looking at one account for national security that includes development is probably the best way to secure resources and to begin to really bolster these arguments.  The second is messaging, both how we message what we are doing but also how we brand it in countries.  We should stop talking about assistance and help.  These are not charity programs.  If we consider them to be charity programs, they will be very vulnerable as charity is with anything else.  Again, we need to get back to talking about enlightened self-interest.  Call USAID U.S. Agency for Foreign Investment and Partnership or something like that.  Do not call it the U.S. Agency for International Development, which sounds like aid.  If you use the words assistance and aid, same with the Foreign Assistance Act, if we start using a different language, we will probably be far better off.</P> <P>The second is how we brand globally.  Those of you who visit a clinic supported by the American people, you will see 50 logos.  It is very hard to tell that the American people are doing anything.  USAID is doing something, PEPFAR is doing something, MCC is doing something, Health and Human Services are doing something and the individual partners are doing something.  But where are the American people?  So we actually would like to see a general logo that is all that the people in the country see which is an American flag with in partnership with or from the American people and that is it, or at least very subtext of the other logos to make sure we are building off of these national security interest, enlightened self-interest for what is going on.  But it is partnership and that is what we should be emphasizing.  It is partnership between the countries; it is not the American people.  Everything we do is in partnership with the people of that country.</P> <P>Last thing I just want to mention is in the current economic crisis, is it essential for us to innovate and recreate how we do development?  People will die today because of the way the United States does development.  We are so fractured and disparate.  We do not build off and leverage our current programs.  And unless we do that, unless we can argue and show that we are becoming more efficient and the tax dollar is being used at its maximum capacity, we are not going to be able to effectively advocate for sustainable resources.</P> <P>So with that I just want to thank AEI again.  It was a great pleasure to be here.  I look forward to the comments and the questions.</P> <P>Roger Bate:  Thank you very much indeed, Mark.  I have numerous questions which come to mind but given that we have two expert respondents, I'm going to bite my tongue at the moment and head over to Mead.</P> <P>Mead Over:  Thanks very much, Roger.  It is a real honor to have an opportunity to provide a few comments to the talk that Mark just gave.  I think the vigor with which he delivered his talk as well as the messages speak to the really dynamic role that he has played in leading the PEPFAR program these last several years.</P> <P>I particularly liked his idea about re-branding.  It is quite annoying as an American.  I was a Peace Corps volunteer and had been working in developing countries for many years.  When you go into one of these clinics and you see the competition among all U.S. agencies with all their complicated Washington politics in a little tiny clinic in rural Uganda, it is a bit annoying.  I wish the branding could be simplified.  I heartily endorse that.  I think we should have a new initiative, re-branding USAID; maybe Steve Radelet will take care of that.</P> <P>I want to try to set the discussion of PEPFAR into a context.  The title of my talk here is based on some work I have been dong recently which you can find on the website at the Center for Global Development.  I want to talk about PEPFAR as a contribution to what I'm going to call the AIDS transition.  I want to argue that the objective of the international aid community and the AIDS community and of the U.S. contribution to the battle against the AIDS epidemic should be to achieve what I m going to call an AIDS transition.  </P> <P>For those of you who have been observing the development business for a long time you might be familiar with a term that is used in population and development literature that has become a sort of classic - this diagram is a classic, it is almost iconic in development economics and population studies.  It describes what is called the demographic transition, which was really hypothetical when I was beginning to teach development economics back in 1970s.  Back then, there was a fear we are at this point where deaths were dropping - this is rate of deaths - and birth rates were not dropping and the gap between the two was growing.  And that gap, the gap between the rate of new births and the dropping rate of deaths constitutes a percentage growth rate which then compounds over time and that leads to exponential growth.  That exponential growth was very worrying to the world, and some of you may know that Robert McNamara in particular was very worried when he became president of the World Bank about what he viewed as the population explosion, and that worry led to the establishment of, for example, health programs and health lending [sounds like] at the World Bank.</P> <P>The solution, if I can call it that, to the population explosion was the demographic transition.  What happened was that for a variety of causes, partly due to programs like those at the World Bank and other donors constructed to address this issue, but also partly due to endogenous reasons having to do with changed aspirations and changed view of what it means to be modern and so forth, the birth rate did eventually drop.  So the gap between these two became low again but at a much more socially desirable point where population growth was low but the death rate was low and as well as the birth rate being low.</P> <P>So what I'm suggesting here is that we should try to achieve this in the AIDS world as well.  We have begun a transition and this is partly due to PEPFAR.  We have begun this transition with the death rate falling due to successful rollout of antiretroviral treatment.  The result has been dramatically beneficial for the populations in question - Mark has talked about that - but it has also meant that the gap between the continuingly high rate of incidents of new cases of HIV and the dropping death rate means that the number of people living with HIV/AIDS of whom a substantial proportion are now on treatment is growing, and it is growing at a constant rate which leads to a compound growth.  That compound growth is actually very dramatic and it raises the issue of sustainability.</P> <P>I have done some calculations and papers published at the Center for Global Development and some work that I did at the World Bank before leaving the bank which show that at the current trends with continuing high rates of new cases, what epidemiologists call incidence of new cases of HIV and sustained effort to treat in these 15 PEPFAR countries, the total cost of the treatment program alone will reach what we now spend on all of assistance, not just in health, not just in AIDS, not just in health but all of development assistance today.  That is about $23 billion by the year 2016.  So sustainability is a real issue.</P> <P>Now, what can we do to think about that constructively?  Well, first, let s think about a couple of things that could go wrong.  This is one thing that could go wrong but this would be a tragedy.  This picture shows what would happen if the U.S. pulled out of AIDS treatment support and if there were no other effective partners who could take up that support.  It is essentially a picture of a solution to this explosion of the number of AIDS patients, but the solution is because people begin to die again.  In fact, during this transition, it would be actually quite dramatic because death rates would rise and you would see a tremendous loss of hope.  Mark talked about the hope that people have now because of AIDS treatment, imagine if this trend were reversed.  So this is one way that the AIDS transition could fail and it would mean a failure for PEPFAR and I think for the United States government specifically.</P> <P>But there is another way it could fail.  Suppose that AIDS treatment continues to be sustained but the incidence rate of new cases is never reduced.  In that case, of course, this ever-increasing growth rate of people living with HIV/AIDS has several consequences.  One is this budget-eating capacity of AIDS treatment which would absorb all of U.S. foreign assistance.  But it is also true that an increasingly large proportion of all the citizens of the countries in question would need to have a drug provided by the U.S. government everyday in order to survive.  This is, I think, an untenable situation for the long term and I m going to talk more about that in a second.</P> <P>An even worse failure, I think, in the sense of sustainability would be for us to maintain this low death rate but to suffer increased rates of new cases.  Now why might that happen?  It might happen if complacency sets in.  In the populations in question, people no longer fear AIDS so some advances that were made in prevention that led to recent declines in the rates of new cases were to be reversed.  And the term that I have been using, others have been using is disinhibition.   Suppose people have been inhibited by fear of AIDS, but then because of the success, the very success that Mark described, they no longer fear it.  And if that happens and if it leads to a resurgence of new cases while at the same time we really do sustain this effort to keep the mortality rate down, then, of course, you have a population explosion of people living with AIDS which is even more dramatic.  So that would also be a failure of the transition.</P> <P>So in order to achieve the transition, we need to do several things.  First of all, the four bullets there under the remaining challenges, the first is precise adherence to treatment is absolutely required in order for people to get the benefits of treatment.  This is something that PEPFAR has been pushing very hard on but as the program is scaled up, there are going to be increasingly difficult challenges for getting people to adhere sufficiently, precisely to the AIDS regimen so that the benefits are achieved and so these mortality rates do not go up.</P> <P>The other problems I have listed, I want to go now to this bullet about how the life-giving characteristic of antiretroviral treatment has these two flipsides, if you will.  First of all, the fact that ART is an entitlement has been pointed to by Mark.  There was, I think, very little recognition of this outside of the inner circle at OGAC where Mark has been working, particularly in Congress and in the general public.  But the fact that if I begin taking antiretroviral treatment today means that I must take it for the rest of my life actually puts the U.S. government in an entirely new situation vis-�-vis recipients of aid in foreign countries.  For the first time, I think, something that Mark said is particularly obvious to both the donors and the recipients, and that is we are no longer in a situation of giving sort of charity which we could on a whim withdraw the next year.  It is not like when you walk in by a homeless man, you give him a dollar one day.  The next day, well, you did not have a dollar in your pocket so he does not get a dollar from you that day.  This person actually is depending on the American assistance for his very survival from one day to the next.  And this means that for the fist time, I think that we can say that the U.S. government has created an international entitlement program.  </P> <P>Furthermore, although Mark certainly has the praiseworthy objective of increasing the partnership aspect of this and having the recipient countries take on a larger share of the responsibility, I have to say that the vast majority of the responsibility in almost all the PEPFAR countries is really in the hands of the U.S.  These African countries are really depending principally on the U.S. as well as to some degree on other donors for this life-giving support.</P> <P>So on the entitlement point, I would expect a little bit of pushback.  Some of you I think are lawyers, and the word entitlement in the United States means something very specific, so am I really using that word correctly?  I think the usual use for the term entitlement in the United States is that benefits are mandated by law and the state is legally obligated to provide those benefits.  That is actually not true.  I mean the person who is receiving AIDS treatment whom Mark visited in Ethiopia or Tanzania does not have a right to that benefit in the same sense that the American social security recipient has a legal right to a benefit.  So in that sense, the word entitlement is being stretched when I use it in this.  But I think that, in fact, there is a very potent constituency worldwide and the United States runs substantial reputational risks if it were to withdraw this assistance leading to the deaths of these millions of people.  So I think the word entitlement is justified and I would be interested in your thoughts on that.</P> <P>And I want to raise this question.  Mark talked a lot about the gratitude that was palpable when he visited the countries with President Bush.  I m sure that is true.  I do not doubt that myself.  When I talk to Africans who are citizens of the countries in question, they do express gratitude.  But I m wondering if that is sustainable, if the gratitude is sustainable, if you will.  How would you yourself feel if you were totally dependent on handouts from a country, a very distant country with all these brand name logos and you know that that has, you know, persisted for 10 years and is likely to persist into the indefinite future.  What I m suggesting is that this is not a sustainable relationship that one can have between partners.  It is really a dependency relationship and it is something that we need to do everything we can to move out of them.  Part of what I mean by the AIDS transition is to try to seek ways to end that dependency relationship.</P> <P>I use the term post modern colonialism.   Maybe that is a bit inflammatory but I think it might be a term that would be applied to the PEPFER program in five years if we have not figured out a way to break that dependency link, that tight link between the U.S. government and the lives of these people from day to day.</P> <P>So what do I suggest?  Some of these are already contained in what Mark said.  The first is economic growth - absolutely essential.  The extent to which the countries grow economically will translate directly into capacity for those countries to actually pay for their own programs and to increasingly shoulder the burdens.</P> <P>But HIV prevention is the most important thing.  Mark talked a bit about that at the beginning of his talk.  I think he would agree with me that we still are struggling to find ways to measure, successfully, HIV prevention results and to put them on the same strong results-based footing that AIDS treatment is today.  And because of that, the claims that have been made not only by the U.S. government and PEPFAR but other donors that are hoping to prevent disease are extremely wishy-washy, very, very weak claims.  For example, suppose I, by a dint of a program from the U.S. government, use a condom in sex today and therefore do not get HIV infected today.  So you have prevented me from getting an HIV infection.  Suppose I use that condom again tomorrow and I do not get infection tomorrow either.  Have you prevented two cases?  Is it possible to prevent 365 cases just by keeping me uninfected for a whole year?</P> <P>So the counting problem is extremely complex and this is partly because the measurement of HIV incidence is complicated.  But it is also partly because the reward structure has not been set up for these countries to actually measure it appropriately and be able to make solid statements about the number of HIV cases prevented.</P> <P>But then in addition to growth and prevention, there is another strand that I think needs to be actively pursued.  Mark did not talk much about this today but I have heard him on other occasions talk about the fact that the PEPFAR people are aware of this and they are actually working on this.  I think there has to be intermediation between the U.S. government as donor and the countries which receive the money.  And I think that that intermediation will help to break this direct link which could, I think, lead to resentment and to a feeling of a kind of post modern colonialist situation here.</P> <P>What do I mean by intermediation?  Well, principally I mean that the U.S. government should look not only to the countries for partnership but it should look to the Global Fund on AIDS, TB and malaria, to the World Bank, to other multilateral -- for example, multinational NGOs and multilateral agencies, and should try to channel its money through these channels so that it is not from the U.S. taxpayer directly to the patient.</P> <P>So that is where I ll stop and I hope that would lead to some discussion.  And I know that we are going to have some interesting comments on other aspects of the PEPFAR program next.</P> <P>Roger Bate:  Thank you very much, Mead, very thought-provoking and I ll give Mark an opportunity to respond if he wants to, to some of those comments in a minute.  But before we do that, I ll head over to Richard.</P> <P>Richard Tren:  Thanks, I do not have a PowerPoint so I ll just sit here.  </P> <P>I think it is important when you are talking about sustainability to kind of divorce issues of sustainability from whether or not the program has been successful on the virtues of the program, because as Mark Dybul certainly explained this is an incredibly remarkable program that has saved countless numbers of lives and prevented transmission of this disease.  And there are enormous benefits and that in and of itself is worthwhile.  But whether or not that is sustainable, I do not know.  </P> <P>My day job is really malaria and malaria control and malaria policies and I would like to talk a bit about that.  We have a very long history of malaria control, over most of the 20th century.  Although this is a very different disease as you already pointed out, I think we can learn some things about the history of malaria control and donor support for public health programs like this.  Of course, malaria, you know, you can treat malaria with six to 12 pills every three days and you are completely cured.  This is not an ongoing chronic disease.  But malaria control does require prevention interventions and malaria control season after season for many years; otherwise, we know that this disease comes back so that there are issues of sustaining that kind of intervention.</P> <P>In the 1950s, with new drugs and new insecticides, there was a great optimism in what can be done for malaria control and global eradication was, with attempts and with the program, global eradication was never achieved.  But despite that, the program was remarkably successful in saving up to a hundred million lives and freeing over a billion people from the burden of the disease.  Some countries eradicated malaria; mostly these were small island states and countries that were becoming wealthy, Western Europe and the United States.  </P> <P>Taiwan and Mauritius are two interesting countries.  These island states had eradicated the disease because they also started to grow wealthy.  But Mauritius is quite interesting because after they eradicated malaria, they remained poor for several years and only started really to develop when they opened up to trade and instituted some economic reforms that increased their economic freedom, which should cause us to sort of question this idea about economic growth and disease, economic growth caused by better disease control.</P> <P>I think the story with malaria over the 20th century is that those countries that matched the public health programs and the disease control with economic reforms that increased their economic freedom managed to sustain disease control and eradicate the disease and keep it eradicated.  Some countries that managed to control the disease really well and eradicate it, like those in the former Soviet Union, saw the disease come roaring back when the People s Commissar for mosquito abatement in the Kremlin found himself or herself out of a job.  Suddenly, the disease came back with big epidemics in Kyrgyzstan, Tajikistan and some of the other stans.  So those countries that do not grow, do not control diseases well and do not sustain public health programs, it seems like you have an obvious point.  Zambia eliminated malaria from large parts of the country.  This was a pretty minor public health program but thanks to Kenneth Kaundas own brand of socialism, there was no way that the government could sustain that program, and by the 1990s it was the number one killer of children, the number one reason for hospital admissions.</P> <P>And right now, thanks to the PMI in part and also funding from the Global Fund, Zanzibar has all but eradicated the disease.  But Zanzibar has been there before.  It was there 40 years ago.  It was there after that and the disease comes back.  And I think the problem with Zanzibar is that the Zanzibar government only contributes about 10 percent of the healthcare budget for the island.  Now what happens when donors, perhaps with justification, decide that there are other pressing public health needs that they want to fund, do we know that the Zanzibar government will actually be in a position to sustain malaria control on this island?  History suggests not.</P> <P>We spoke about economic growth and disease control.  There are linkages there.  We know that in Bangladesh when malaria control improved, agriculture production increased by about 50 percent directly as a result of better malaria control.  In Sri Lanka, there was, according to the World Bank between the 1940s and 1970s, when there was pretty good malaria control then, that disease control really contributed to about an increase in about nine percent in incomes, specifically because of that disease control.  And as Mark Dybul has already explained, these benefits for HIV a supporting fundraiser because of the people that are affected by the disease.  </P> <P>But controlling a disease alone is not enough.  You need economic growth.  It seems fanciful to think that removing malaria or HIV/AIDS from Burma or from Zimbabwe will suddenly allow those people to become wealthy because of the failures in all the other important institutions that actually allow people to benefit from their labors and to working in a peaceful way and to trade and to prosper.  So I think openness to trade and economic freedom and growth, it is pretty clear, lead to economic growth and economic growth leads to better health outcomes in these places.  Owen [phonetic] did a nice job of explaining the linkages between openness to trade and better health outcomes.</P> <P>Where does this leave Africa for not just malaria but HIV/AIDS and perhaps TB as well?  If we are concerned about sustaining programs, are we putting money into those countries that are getting those kinds of institutions right so that they can in time start paying their own way and sustain their own programs without external support?  Well, I have the data - again coming back to malaria - I have data for malaria control.  Bob Snow is a researcher from the Wellcome Trust in Oxford University based in Kenya, and he has done a nice job of compiling where donors are spending money in malaria control.  The first thing is that for Africa, donors are putting in, in 2006, about $600 million into controlling malaria on the continent.  African countries are only providing about 10 percent of that, less than 10 percent in fact.  That dependency is far greater than in other regions in the world like Latin America and the Caribbean or Southeast Asia and Western Pacific.  But, of course, we have to note that the disease is far worse in Africa.  Malaria is far less of a public health problem in those other regions.</P> <P>But if you look at Bob Snow s data, and this is just from sort of an initial analysis of this and somewhat cautious in the way I use this, but we cannot find any kind of correlation between where donors are spending money in malaria control and any correlation between measures of economic freedom or measures of Transparency International s Corruption Perceptions Index.  So it seems that donors are putting money where malaria is bad, not in those countries that have the right institutions that can grow their economies.</P> <P>And that is fine, these are humanitarian programs.  These are designed to save lives from malaria, but let s try not to think that by doing that you are suddenly creating a sustainable healthcare program.  So if you look kind of depressingly at most of Sub-Saharan Africa, most of these countries - if we care about economic freedom - are at the bottom end of any index of economic freedom.  If you look at the World Bank s Doing Business Report, they note encouragingly in the latest report the 28 African countries implemented important reforms that make it easier to do business, which we hope then will create wealth and generate the kind of income that we need to sustain all these good things that we want.  Some countries that polled [sounds like] up as successfully doing this are Senegal, Burkina Faso, Botswana and Rwanda.  But again, if you look at the bottom third of the index of countries in the World Bank s Doing Business Report, 56 percent are in Sub-Saharan Africa.  Only 6.6 percent are in the top third and that is made up of four countries, of South Africa, Namibia, Botswana and Mauritius.</P> <P>And in this latest report, out of 46 countries in Sub-Saharan Africa they explain that 13 countries are doing the right thing in trying to improve their business environment, which of course is good.  But 28 countries fell in the index and five remain the same, so they are either not reforming and other countries are kind of moving ahead of them, or they are actively undermining the ability of businesses to do business.</P> <P>So when it comes to talking about sustainability, I do not think that enough African countries which bear the greatest burden of HIV/AIDS and are the most aid-dependent are reforming far enough or nearly fast enough in order to create economies that can sustain large public health programs.  Most of these countries cannot sustain malaria control programs which are comparatively simple compared to large AIDS treatment programs and treatment prevention programs.  And if this ignores some of the concerns, then perhaps these large donor programs may actually undermine a country s ability to manage its own program by perhaps distorting priorities in countries from what is really needed, perhaps feeding into corruption.  </P> <P>I do not want to dwell on that, but there is an interesting debate and discussion on this in Foreign Affairs but Laurie Garrett had a long, interesting piece in the debate.  In fact, Roger responds to that.  But these are real concerns, I think, and, of course, Mark Dybul has responded to some of these things about ensuring that there is local ownership.  But I think that as long as everybody knows that there is an external donor that is paying for them or paying for a program, I think it is going to be difficult to get true local ownership in that regard.</P> <P>I wanted to touch on one last issue which is kind of stepping away from these comments about general economic freedom and development, and that is specifically to talk about drug policy.  The WHO has come out with an estimate, but who knows how reliable this is because of the nature of this problem, but they estimate that in developing countries, about 30 percent of medicines are counterfeit or fakes.  We, Roger and I and others, conducted a study in six African countries looking at malaria medicines last year and found that 35 percent of the medicines were either fake or substandard, just poor quality, badly-made medicines.  Recently, in Southeast Asia, Interpol arrested about 200 people and seized several million dollars worth of fake AIDS drugs, fake TB drugs and fake malaria drugs.  Now the governments of the countries producing these medicines as well as those importing them really need to do much more to improve their oversights and regulations of these medicines.  But everybody can pretty much agree that someone selling fake drugs is a pretty evil activity and is criminal and that they should be prosecuted.</P> <P>There does seem to be a sort of -- people give a bit more leeway to the issue of substandard medicines.  And we see this again and again in malaria, that the idea of local production is promoted as a good in and of itself.  Now if a drug manufacturer in a country that suffers severely from malaria or HIV/AIDS or TB has a local manufacturer that can produce a good quality product at a good price, well, of course, they should be allowed to sell that drug and we should be encouraging that kind of activity as we would with any kind of the product.  But this is not what we see a lot in malaria.  And I think this is true of the other diseases that donor countries, the recipient countries themselves, many countries in Africa plus many NGOs and activists push the idea of locally-produced medicines regardless of quality and regardless of the economics, ignoring centuries of trade economics and whether or not this makes sense for a country to produce these medicines.</P> <P>And you know, we see this again with -- you know, the German aid agency seems to think it is a great idea to support and promote local production, ignoring some of these issues of quality and price.  And one has to wonder whether or not the activists that pushed this indeed, the donors that are pushing this, on whose behalf are they acting?  Are they acting on behalf of the wealthy, smart businessmen in the capital cities of many of these countries?  Some of whom I have met, these are smart businessmen.  Were they really acting on behalf of the people that need good, safe drugs of TB, AIDS and malaria at a good price?  Anyway, I ll let you think about that.</P> <P>Let me end then, just kind of say to sum up, I try and answer the question, Is PEPFAR sustainable?   Strictly talking about the word sustainable, I do not think so.  I do not think any of these public health programs are sustainable, unless there is somebody paying a lot of money.  Taxpayers somewhere need to fund them.  They are not magically sustainable.  It does not mean that these are not the right things to do and that we should not be supporting them.  It does not mean that these are incredibly worthwhile programs that bring enormous benefit to many millions of people and that it is not the right thing to do.  I just think we need to be a bit more careful about justifying their existence because they are sustainable.  Thanks.</P> <P>Roger Bate:  Well, thank you very much, Richard, for more thought-provoking comments.  I'm going to turn over to Mark, if you would like to respond immediately, and then I'm going to open the floor for some questions.</P> <P>Mark R. Dybul:  Just a few comments.  I ll try to pull the excellent things that Mead and Richard said in three buckets.  First of all, I agree with most of what you said and I think these are issues that we all need to be addressing and this is not cut and dry.  This is going to take a lot of thought and a lot of issues.</P> <P>Mead talked about the Global Fund, the MCC and they are a whole bunch of things I knocked off because we got started late and this is one I should not have knocked off.  One of the ways we are going to have sustainability for the future is by relying on multilateral organizations that, in effect, insulate the American taxpayer.  And the Global Fund for HIV/AIDS, I think, is one of the greatest opportunities there and that requires the Global Fund to stick to its original principles to be effective.  They have moved a lot in that direction.  But I want to get back to the principles, the sustainable principles: country ownership, good governance, results-based, all actors being involved.  If the Global Fund does that, that is where in 10 years we should have most of our money.  And I have said repeatedly, publicly, that I have always viewed our bilateral program as an intermediary step.  If we needed immediate action, we could move faster.  But for the long term, the Global Fund should be, if it does what we hope it will do, should be the principal vehicle in the future.</P> <P>And if you think about those principles, the true heirs of those principles are not the bilateral program.  The true heirs of those principles in my view are the Millennium Challenge Corporation and the Global Fund.  Those are the two institutions currently that really push that envelope in development.  And so MCC, I hope all of you help support that in the next administration because those really are the institutions and if we do not think about that and just look at immediate impact, we could skew things.  So I could not agree with you more.  And I think that is a key part of sustainability.  That also leads to, is gratitude sustainable?  I think that is an excellent question but I think it begs the question of if we do not sustain the principles, if we do not actually implement the country ownership, good governance, results-based, then it will fail.  Then over time, you cannot sustain.</P> <P>But some of the most impressive gratitude, if you want to put it that way, I have seen from the countries and the presidents and people at clinic level is that philosophical revolution.  They are most thankful for the change to say, You guys are in charge.  We will support you financially, but you are in charge.   And that has been a radical shift.  And if we do not sustain that, then yes, this will all fall apart.  I worry less about the financial support as long as you have that country ownership.</P> <P>And I think it is very possible and we actually have examples.  We have a great domestic example: The Indian Health Service in Alaska, which I think is one of the most remarkable examples.  Fifty years ago the Indian Health Service in Alaska was run by people like me, rear admirals in uniform in public health service.  All the doctors, all the nurses, everyone was someone from the mainland and in the public health service.  Now, and because the Indian Health Service is basically run by Indian tribes, there was actually a national treaty between the United States government and the tribes on these programs.  We provide virtually all the money, but it is completely run by them.  All we do is do audits one to two years to make sure the money is being well spent.</P> <P>I do not think there is a better model for development.  And if we push that approach - and I think the Global Fund and the MCC are the vehicles to do that for the long term - then I do not worry about these other issues.  I do not worry about -- but if the relationship stays the way it was, goes back to where it was five years ago where it is donors and recipients and we dictate and we do not give them the leadership, yes, then it is not sustainable.  So we need that shift.  It comes back to the sustainability of those principles, the philosophical revolution that has radically changed our approach to development.  And if we do not sustain those, then everything else falls apart.</P> <P>On prevention, I just want to touch briefly -- I agree with you that there is a significant risk of increase but it is not in Africa.  We might see some stabilization as we are in Uganda, but where the real growth is going to occur is likely in countries where it is not going to have a huge impact on the government and the economy and the structure.  So if Russia doubles, triples, China doubles, triples, it is one percent of the population, two percent of the population.  So we will not see that type of impact.  I do not think we will see that in Africa.</P> <P>We also have to make sure we are implementing new technologies to countermand some of the issues you raised, including male circumcision.  We should have microbicide -- well, we are hopeful we will have a microbicide treatment for prevention so we need to be innovative.  </P> <P>I agree with you we are not measuring terribly well; measuring a negative is very difficult.  No matter what you are doing, which is effectively what we are doing, we are using estimates.  However, in terms of the countries not being able to do a good job of measuring, to me this is one of the most remarkable things - it is really helping to build an accountability-results base.  We are supporting - and this is extraordinary - a great increase in the ability of countries to collect data and to use that data to change their programs.  And we see it at the clinic level to the national level, and it is extraordinary.  There is a spillover impact from this accountability-results based approach for PEPFAR that is leading the national ability to gather information, to use information, which is leading to greater country ownership.  So I actually think what we are trying to build, and is being built, will contribute tremendously to those principles and to overall development.</P> <P>On malaria, I do not want to go into too much stuff.  On Zanzibar, as you pointed out, you know the sad joke is when the Minister of Health in Zanzibar was told that malaria was going to be eradicated, he said, Great, we know how to do that.  We have done that before.   Which is true, they have done it before.  The key is sustaining it.  And what I wanted to mention - I do not want to get into all the details, most of which I agree with on, Richard - is what it shows to me is the lack of linkage.  It gets to the fact that people will die today because of the way we do development.  And if we do not do a better job of linking programs, to leverage and use resources more effectively, we cannot argue effectively.</P> <P>One of my favorite examples is in Zambia, young kids and mothers with HIV get malaria.  So we support bed nets, the PMI supports bed nets.  We also support a massive infrastructure because of chronic health care.  We have in Zambia 25,000 volunteers reaching 350,000 homes every week - every week.  Where they are going every week for palliative care, for orphan care, they can make a bed net and they can follow that person next week to make sure they are using the bed net right.  </P> <P>So we partnered with PMI and the private sector and delivered 500,000 bed nets within six weeks of arrival in the country through our distribution system that we had already paid for before the rainy season, covering 1.5 million people, and we did it and saved PMI, the President s Malaria Initiative, two-thirds the cost because two-thirds the cost of delivering a bed is the distribution system.  And we are already paying for the distribution system.</P> <P>We have tried to go country by country with PMI to make that happen but the bureaucratic hurdles, even with Tim and I saying we have to do this, have been extraordinary.  And just to give you a good example, we funded a supply chain management system, huge systems, supplying 3,000 commodities and drugs, one of the most remarkable things out there, maybe our greatest gift to the legacy of PEPFAR which I hope Global Fund begins to use and others.  When PMI was started, we went to them and said, For god s sakes, we got the supply chain management system, bed nets, ACTs, everything is already in it.  Just use it.   USAID runs that supply chain management system.  They run PMI.  They refused to do it.  They set up their own supply chain management system.</P> <P>Male Voice:  Who is they ?</P> <P>Mark R. Dybul:  USAID.  And then they funded the same partners we already funding.  So now the countries have to deal with two distribution systems from the same partners with two different -- and we are wasting money because we are double-paying them to create this system.  That is indefensible and if we keep doing that, then we cannot justify our systems.  So we need to link our programs better.  And that is not just for malaria; that is for family planning; that is for every aspect in neglected tropical diseases; that is for every aspect of what we are doing.  If we do that, then I think we can do more.</P> <P>Roger Bate:  Thank you very much.  I'm glad you guys respond right at the end.  I ll give you the final word but I do want to get some questions from the floor.</P> <P>Nick, first one over there, have you got the microphone?  Yes.</P> <P>Nick Eberstadt:  Nick Eberstadt, American Enterprise Institute.  PEPFAR is a magnificent humanitarian gesture and the world correctly has saluted the Bush administration for it.  Foreign aid always involves inadvertent consequences.  I wanted to invite the panel to discuss one of these.  In terms of cost-benefit calculus, ART is extraordinarily unforgiving especially for people.  We see alternatives to ART, clean water initiatives, malaria, which look as if they could save lives by battling [sounds like] disease or other things at much lower cost than ART.  My question to the panel is this: Is it sustainable practically or ethically to tilt our international foreign aid expenditures towards one particularly gruesome disease and its treatment when allocating those resources elsewhere might save many more lives, and why?</P> <P>Roger Bate:  Thank you very much.  We will take a few more questions and the panel can respond.  Tony Carroll [phonetic] here.</P> <P>Tony Carroll:  Mead, thank you for your data and like Mark pointed out, it does sort of assume a technological constant with the introduction of new therapies or on the converse, the alternative scenario which is increased resistance.  So you know, that is sort of is one thing that I would like -- maybe you to address or maybe you do not need to address.</P> <P>Mark, we have 20 years of data in Botswana on the issue of prevention.  I was a Peace Corps volunteer in Botswana 25 years ago.  We had the highest rates of sexually transmitted diseases then that was in part because of lifestyle, culturally embedded lifestyle issues.  Do we now have the data which we can look and see that we have made some attitudinal changes on lifestyle changes in Botswana, because that is really where the battle is?</P> <P>Roger Bate:  Okay, some -- take one for Phil Levy and then [indiscernible].</P> <P>Philip I. Levy:  Phil Levy, American Enterprise Institute.  And Mr. Dybul, I wanted to ask you, I was struck by your objective, your description of the objectives that the Indian Health Service model, where ultimately you could have local ownership and you give them money and perhaps you do an audit every year or two.  Suppose we got there and you do an audit, you find this money has been horribly misspent.  Then what do you do, especially given what Mead Over described as sort of the dependence?  Do you walk away?  Do you shut off the money and say, We cannot stand that kind of waste? </P> <P>Roger Bate:  We will take two more questions then we will --</P> <P>Male Voice:  Thank you.  With regard to Mead s presentation, let me just ask, do we have any data from the West about the changing cost-benefit analysis of people who might have free access to antiretroviral drugs in the future?  In other words, do people who know that they will be entitled or allowed to receive antiretroviral drugs in the future engage in more risky sexual behavior knowing that contraction of AIDS will no longer be a death sentence?  Do we have any data inducing that will be applicable to Africa as well?</P> <P>May I ask one more question?  Of Mark I want to ask, I do not doubt, of course, the humanitarian aspect of PEPFAR.  I wanted to ask -- but I'm often skeptical about justifying things from a national security standpoint.  And I wanted to ask you about the hopelessness.  I know you said it was a squishy subject, but if terrorism is indeed an outcome of hopelessness at least to some extent, then we would certainly see much more terrorism emanating from the most hopeless continent, which happens to be Africa that we have seen.  So do we have any data on that?  Thank you.</P> <P>Male Voice:  [Audio glitch] First of all, I would just like to thank the panel for three very terrific presentations and more particularly for an incredible program.  I mean it is amazing what has been accomplished.  But it does seem to me that the Indian Health Services model really does not address the issue here because as you said, they do the program, we pay for it, there is not any question about the U.S. continuing to pay for it indefinitely.  It really seems to me the question here is how big is the bill going to be and who is going to pay it?  And this question is not going to be as clear as I would like it to be, but it seems to me one thing we are not clear about is whether the bill is likely to stay even or come down or grow.  And, of course, that is a crucial issue.  My sense is if it does not come down, sustainability really is going to be a problem.</P> <P>I reinforce Mead Over s point about long-term resentment in the sense that at a personal level if you felt you are facing a death sentence and the U.S. comes in and brings in some medicine that removes the death sentence, of course, you are going to feel gratitude.  And I think we are experiencing the front end, where people expected a terrible outcome and now they suddenly find their lives are saved.  We are going to create a situation where they expect to live and they are no longer going to think -- in a sense it is the same reason it becomes an entitlement, the gratitude goes away as well.  I mean people do not seem to be very grateful for entitlements.  It is a fact of human nature whether you like it or not.</P> <P>But it does seem to me that when it comes to who pays the bill, that what I have heard so far does not offer a solution, that in a sense what I'm hearing from Mark is the U.S. taxpayers should be happy to pay the bill because we are getting all these national security benefits.  That may or may not be true especially if the resentment factor starts to kick in.  But then Mead used -- you correctly, I think, said it is great if we should get rid of all these little brand names and put the American flag on it, but then your solution is remove the American flag and put some flag with no nationality on it and then expect the American taxpayer to kick in these levels of money.  </P> <P>I do not think that works.  I'm not saying I have an answer.  I do think that part of the answer has got to be to address, number one, getting the countries involved to pay more, which it seems to me is where you get into the questions of economic growth, and the question of is there a way to ration, that is, incentive ways where countries that are doing a better job of reducing infection are sustainable and those countries that are failing, you have to take off life support?  It does not sound right to me.  And I'm not suggesting that as a solution, but I guess all I m saying is it seems to me you have raised some very important questions but so far, to say we will turn it over to the Global Fund is not an answer either.</P> <P>Roger Bate:  Okay, thank you very much, very good questions.  We have already run out of time but obviously we want to hear the responses to those questions so we will get on the panel and with Mark because he has got the most to respond to.  Richard, any particular thing you wanted to comment to?  I know Mead has got a question he needs to answer because it was directly posed.  Anything?  If you do not, then you do not have to.</P> <P>Mark R. Dybul:  No.</P> <P>Roger Bate:  Mead?</P> <P>Mead Over:  [Audio glitch] several interesting points that have been raised and I'm sure Mark will have responses.  On the cost-effectiveness of antiretroviral therapy, this is something that I have worked on all my professional life [indiscernible] analysis of health care interventions for cost effectiveness.  And there is no question that antiretroviral treatment as I first -- I first did this analysis in the early 1990s, actually in a preliminary way even before that.  Antiretroviral treatment is much less cost-effective, as far as we know, as far as we can best guess than many other interventions to save lives and life years in Africa.  No question about it.  But I think then we have to get into the political economy.  And the political economy of antiretroviral therapy has clearly been around this issue of can you measure the benefits.  </P> <P>When you put in a clean water program, you save a lot of lives but they are statistical lives and the names of those people are not known; the names of the people whose lives you saved are not known.  Nick is smiling back there, right?  And that makes such tremendous difference.  It makes a tremendous difference in the community where the lives are saved, and it makes a tremendous difference, I would argue, in the ability of the American people who work for USAID and for the international health efforts in their ability to sell these programs to the taxpayers in the donor countries.  I think this is part of the secret of Mark s program success.  They have been able to really convince people on the Hill, even skeptics who are not particularly inclined to give that dollar to the homeless man on the corner, that you can measure the benefits.  This picture of the individual who is on the death bed and is a walking skeleton who is transformed within a few weeks to be a healthy productive member of society and parent, those are dramatic pictures and they make a big difference.</P> <P>Now I think part of the solution to the AIDS transition is to actually learn the lesson from that and to try to make much more measurable and much more concrete the gains that we make from programs like water and sanitation and actually from HIV prevention.  We have to be able to demonstrate to the local people and to taxpayers in donor countries that these things work.  I think the way to do that is to give responsibly for HIV prevention at the municipal level in Tanzania.</P> <P>It is fine for the health program and the various NGOs to all be involved and be getting these little grants of money from the World Bank and from PEPFAR for HIV prevention, but it is absolutely impossible to account for the results that are being achieved in that way.  Instead, there has to be a measurement, not of the negative as Mark has pointed out that is a problem but of the number of new cases.  </P> <P>We have to make real concrete measures of the number of new cases in each community and we have to hold the mayor of the community responsible that the next year will be less by a substantial amount.  That is the solution, ultimately, to the sustainability problem that Paul raised in the back, that it is not a quick solution.  The problem is it will take 10 years.  Even with dramatically successful prevention improvements, it will take 10 years at least, maybe 15 years, before you get through this AIDS transition that is up here on the board.  And I think that is part of the cost effectiveness of that, that the program is a political economy calculation because it will get the U.S. and the international donors out of the business of supporting antiretroviral treatment.</P> <P>On disinhibition, yes, there is data in rich countries that shows that, in fact, there has been an upward trend in risk behavior among groups that had previously showed very positive beneficial changes in reductions or misbehaving response to the threat of AIDS.  Part of that are new cohorts of young people who come into groups of, for example, groups of gay men in San Francisco and Amsterdam who did not actually learn the lessons because they were too young to learn them when those lessons were being learned in the previous decades.  But part of it also appears to be a response to the fact that AIDS is no longer a death sentence.  Whether this is going to be true in Africa depends on the critical question and that is actually, has behavior been inhibited at all?</P> <P>There are some people who claim that prevention programs never worked at all and there is never any inhibition.  So if you do not have inhibition, you cannot have disinhibition.  I do not think that global sort of blanket statement actually works because there have been remarkable success stories with respect to, for example, condom use in very high-risk groups and prostitute groups in Nairobi and other important cities.  And there has been some data that has shown that when those groups learned through the media that all of a sudden AIDS treatment is available, the condom use goes way down again, so there has been some evidence of reversal.  Whether that will happen on a large enough scale to reverse the reductions in incidence that we have seen recently is not yet clear.</P> <P>The last point I want to talk about is rationing.  You know, in this tremendous explosion of access that Mark talked about going from 50,000 people getting access to antiretroviral treatment to 2 million, nobody raised the question of rationing.  You have not heard that question discussed.  Why would anybody raise it?  Because the gains have been so dramatic from each year to the next but the fact is that even with 2 million people getting treatment now, there are millions more who are not getting it.  </P> <P>And if we actually stabilize, if we do not continue to expand access at the same rate, which I would suggest as probably impossible, that means that the number of people getting treatment might reach - if we continue to make some improvements - say, 50 percent of those people who need it each year, and 50 percent of those people who need it each year on a sustained basis over time on a constant sort of plateau percentage means constant need to ration.  And the rationing aspect of this is going to become more evident at the local level and that is going to build resentment.  And we do not yet have a plan that I have heard to go forward with that rationing.</P> <P>We can sort of turn over the problem.  We can try to turn it over to the local government and say it is your problem, you ration.  Do you want to use prices?  Do you want to use queuing?  Do you want to use lottery?  Do you want to use political preference?  But I do not think that is going to relieve us of this responsibility exactly because we are funding it.  People are going to turn to us and say, Our program is unfair, and I actually do not know what the answer to that is.</P> <P>Roger Bate:  Mark, you have got about 11 or 12 points to make and you have got 90 seconds to make them.</P> <P>Mark Dybul:  I'm not going to get to the vast majority of what you say.</P> <P>First of all, I agree with a lot of things that have been said.  Just quickly, yes, there is evidence in Botswana the recent demographic health survey, behavior change and declines and prevalence, modest but there.  On [indiscernible], I think this is a fascinating topic and I just had it with Bill Gates actually.  It was a fascinating discussion and he began by saying, [indiscernible] are pretty coldhearted but we have to look at it.   My response to him is we have to be even more cold hearted, unfortunately.  Who is actually dying and what is the impact on development?  And that is where I get to the impact of HIV/AIDS in the 15- to 50-year-old which has a radically different impact.</P> <P>Secondly, we saw gains in water and other aspects of health for the last 50 years.  We saw increases in life expectancy in most countries in Sub-Saharan Africa, significant ones.  One disease reversed all of that.  So in the face of all those other diseases, we made public health gains but one disease reversed all that, so we have to be even more cold hearted in looking at [indiscernible] and who is dying and who do we need to save.  It is tragic but we have to do it.  But it also shows that we need to link, connect the dots of development.</P> <P>You know, we have a water program we can do far more.  I think we can do 40 percent more of the money we have today across development if we link what we were doing instead of the bureaucratic walls that we have.  So if we link, we could probably manage a lot of these.</P> <P>On national security, is there evidence of growth of terrorism in Africa?  Secretary Wolfowitz could probably give you more information but, sadly, there absolutely is.  Our missions in East Africa and West Africa and increasingly in South Africa are dealing with this far more than they are dealing with many others who they should be dealing with.  The Rift Valley goes right through Africa.  Africa is 50 percent Muslim not very conservative Muslim at this point but there are enormous inroads there - and half Christian.  It is absolutely on everyone s plate right now for terrorism in Sub-Saharan Africa.  There is a reason AFRICOM was created and I cannot get into a lot of details.  A lot of this is classified, of course, but this is a real serious issue and there is, unfortunately, more evidence for it than we can talk about here.</P> <P>In terms of the bigger picture which most of you raised, which is, what is real sustainability?  How does the Alaska model fit in?  What do you do when you audit someone and they do not do very well after a while?  In the end, as Mead and others have said, this is a long-term issue.  Getting to this place, getting to where we were in Alaska took 50 years.  Getting there with the Global Fund -- and there is an absolute tension between multilateral and public diplomacy gains.  There is a definite tension there and you start losing them, but over the long term I think you solve all those problems.  If you are taking a 10- to 20-year horizon as opposed to a five-year horizon, I think you can actually get to them.</P> <P>First of all, what you are doing in that 10 to 20 years as we did in Alaska was build the structures so that you do not have to worry about the corruption and the difficulties in 10 to 20 years.  You cannot do it today but you can do it over time and we have increasingly done it.  And this partnership compacts I talked about is the next steps to push us there, but it is a long-term thing.  And then we probably will not have the problems just like we do not have in the Indian Health Service, but we would have 50 years ago if we just gave them the money then and said, All right, we are going to come audit you.   You have to build the structure so that you have them in place so that does not happen.  There will be difficult decisions, there will be problems but they are very manageable.</P> <P>Same on the tension between multilateral and how we get credit for it.  Over 20 years, when it is clear, we are giving 90 percent or 80 percent to these things -- has not happened in the U.N. but I think in these areas because of the way we were beginning and the way we were working with the leaders on the ground, you can solve that tension.  It is not going to be easy but I think over time, you can.  If we did it today - if today we put all the money in the Global Fund - it would not work.  We would lose the public diplomacy benefit that we talked about.  We might lose some of the other national security benefit.  But over a 10- to 20-year horizon, I think you can manage those things.</P> <P>There is also the issue of politics around all of these in sustaining that coalition.  Can the taxpayers keep paying for it?  I think we can if we make the arguments better and collect the data.  We are not there yet on development of national security in terms of the data.  There are some intriguing things but we are not there.  We have to build that database and then we need to build the coalition which we had for PEPFAR and others, and it is there.</P> <P>I mean if you look at the votes in the Senate and the House on PEPFAR, it is very clear where the coalition is.  It is very clear where the coalition is and with data, you can build that coalition.  The only people we lost were the fiscal conservatives.  We had a lot of Republicans voting who were fiscal conservatives who also have humanitarian and social concerns, some of them from their faith.  So the opportunity in coalition is there and as we build the database for national security, possibly have a unified account for national security that includes development, I think we can get there.</P> <P>I agree with all of you.  This is tough stuff and we are all going to be working on it.  But if you take a 10- to 20-year horizon but start planning for it now, I think you overcome most of these problems if we do it carefully, if we do it smartly, and if we build the coalitions that are necessary; otherwise, it is not going to happen.  You are absolutely right.  These will be viewed as charity programs and they are not sustainable, but if we do it right, I think they are.</P> <P>Roger Bate:  Well, thank you very much indeed.  We are going to immediately transition into the next panel.  I do not see the next panelist but I'm sure they are just outside ready to come in, so thank you very much.</P> <P>[Dead air from 01:40:58 to 01:54:47]</P> <P> </P> <P>Entrepreneurial Philanthropy</P> <P>Arthur C. Brooks:  Thank you and welcome back.  Welcome to this panel entitled Entrepreneurial Philanthropy .  My name is Arthur Brooks.  I'm the President of the American Enterprise Institute.  I'm delighted to welcome you all here.  I'm very pleased of the wonderful turnout we have had for this important conversation and especially grateful to my colleague, Mauro de Lorenzo, for organizing such a useful event.  It is good to see so many people from around Washington and other places having this conversation.  I'm very pleased and proud that AEI can be at the center of this.</P> <P>We hear terms a lot like entrepreneurial philanthropy these days.  You know, when I have used that term, I have noticed that traditional philanthropists, if they can be called that, tend to roll their eyes and say, It is just some buzz word that newer philanthropists or younger philanthropists want to use to distinguish themselves from what we have always been doing.   So my question is, is there something that really is new and entrepreneurial about the kinds of philanthropy that we see today, particularly in the world of development?  And I have given that a lot of thought in my own work and it does, in fact, appear to be the case that there is something we can call entrepreneurial philanthropy and there are ways in which we can distinguish it from what we have always experienced.</P> <P>For one thing, one of the things that is salient in the research on philanthropy over the past 10 years is that younger donors, which means people under about the age of 55, these days tend to react to appeals to giving in entirely different ways than older donors do.  Most specifically, we find that duty appeals where people are reached and asked to give because it is their duty to do so for a particular institution, that works for people over the age of 55 far more than it does for the younger generation and we find that that is a true generational phenomenon.  In other words, the age at which duty appeals are working is getting older and older.  There is truly something different about giving for the cause of impact as opposed to duty, and that is an entrepreneurial phenomenon.  Younger donors truly do give because of impact appeals, which means that thinking like entrepreneurs, thinking about donors as investors is really critical these days.  Entrepreneurial philanthropy can be defined that way.</P> <P>There is also a movement on the donor side, particularly in the realm of development, away from poverty alleviation and toward prosperity stimulation.  Now that is more than a cosmetic difference in the world of development because it guides what we do.  Entrepreneurs like to think about creating tools and creating opportunities as opposed to simply solving problems.  When threats and crises are seen as opportunities, an entirely more entrepreneurial environment is made possible.  Entrepreneurial philanthropy appropriates a new language for thinking about opportunities as opposed only to tragedies and threats.</P> <P>These are two ways in which a new generation of philanthropy really can be thought of as entrepreneurial.  We are going to hear about more.  We are going to hear more about the latest thinking about how entrepreneurs and organizations can use venture philanthropy in new ways.  We are going to hear from practitioners about what is going on in the world of entrepreneurial philanthropy.  And to do that, we have a terrific panel of five experts, practitioners and donors.</P> <P>We are going to start on this subject today with Mike Fairbanks who is the co-director and co-founder of the S.E.VEN Fund, which is a new Boston-based philanthropy that accelerates the adoption of enterprise solutions to poverty.  He is a member of the Rwandan Presidential Advisory Board and his most recent book from 1997 is Plowing the Sea: Nurturing the Hidden Source of Advantage in Developing Nations.</P> <P>We will follow Mike s remarks by those from Carol Adelman who, many of you know, she is a senior fellow of the Hudson Institute and has created something that has become very popular and has gotten a lot of note in press over the past few years, which is the Index of Global Philanthropy.  Under the first President Bush, she was an assistant administrator of USAID before going to Hudson.</P> <P>Following this, we will have a few remarks from Will Inboden who is the Senior Vice President of Legatum Institute in London, which is a new think tank and a sister institution of the American Enterprise Institute.  AEI and Legatum are working together very aggressively on a common policy agenda.  Before going to Legatum, he has held senior positions in the National Security Council and the Department of State.  Before that, he spent some time right here at AEI.  He knows the think tank and development terrains, both of them very well.</P> <P>John Orrison is the Vice President of Burlington Northern Santa Fe where he has created the second largest railway company in the United States.  He will take the largest; they are on the way to being the largest.  He has been in charge of a pro bono effort from his company to link parts of Africa in a railway network, the expansion of transportation in Africa that did not exist before and has already secured government agreements.  This looks like it is going to be a reality.  He is a corporate practitioner on the ground for making development solutions a reality in a truly entrepreneurial way.</P> <P>And finally, we are going to hear from Kim Tan, the successful biotech entrepreneur.  He is the founding chairman of SpringHill Management in London, which is a private equity firm focusing on emerging markets.  He is also a leader in the field of social venture capital and the author of Fighting Poverty Through Enterprise - The Case for Social Venture Capital.  So you can see that we have a lot of experts from a lot of different realms so I'm going to turn it over directly to Mike Fairbanks.</P> <P>[Audio pause from 2:01:03 to 2:02:04]</P> <P>Michael Fairbanks:  I have about 10 or 12 minutes to frame this a little bit.  I m a very frameworky sort of guy and I want to impart to you some of these tools that might help to shape the discussion going forward a little bit.</P> <P>Einstein said that the fish do not understand the water in which they swim, so sometimes we have to go back to the fundamentals just for a moment.  And one of the fundamentals is just asking the question, what is prosperity?  And prosperity can be looked at in two different ways.  There is sort of an income statement way where you look at it as a flow of income, or as economists like to use, purchasing power.  And what we are finding is that as purchasing power goes up, sociologists and anthropologists are finding that there is a very positive impact on a set of progressive human values.  When prosperity goes up as measured by purchasing power to a rate of about US$5,000, we see improvements in tolerance amongst peoples.  In other words, an ability to open your heart and your mind to people unlike yourself.  We see rates of improvement in civic engagement.  We see a predisposition towards treating subordinates and people above you with greater regard.  We see increased rates of self-esteem and happiness.  So income is a really important thing, especially for the countries that we all tend to talk about.</P> <P>Now, there is another way to look at prosperity.  As a stock of assets, having to do with basic factors like location and subsoil assets and having to do with the fertility of soil.  The second thing is basic financial capital money supply, the velocity of money, international savings rates and things like that, and manmade capital roads, satellites, houses, and all kinds of buildings.  But these are the easy to see, easy to measure forms of capital.</P> <P>There are four types of wealth or stocks of capital that are almost impossible to measure, difficult to see and that are perhaps even more important.  Institutional capital like wealth is positively correlated with rule of law.  It is slightly positively correlated with democracy.  It is very positively correlated with institutions that function in non-corrupt ways.  </P> <P>Knowledge capital libraries of information and databases.  Paul Romer and Joe Stiglitz, you know, Nobel laureate and future Nobel laureate have described the idea gap between nations and information asymmetry.  Knowledge is really important.  Human capital the greatest quote in the History of Economic Development by Gary Becker at the University of Chicago was, The only investment with the possibility of infinite return is investment in children.   It is the best quote you can hear in economic development.  </P> <P>And then, finally, the third rail of economic development is cultural capital, not just fashion and music and language and things that are tactile and you can experience but attitudes that embrace innovation.  It is the ability to take rational risk, look into the future, be action-oriented and perhaps, even most importantly, a belief in competition as a force for positive change.</P> <P>Now if these seven stocks are in place, they create the conditions for incomes to go up.  When incomes go up, they create the condition for these progressive human values tolerance, civic engagement, self-esteem and so on.  That is what we all do for a living.  That is what we all do for a living in economic development and philanthropy.  We try to create strong societies with progressive human values.</P> <P>So the question is, if that is our strategy, what is our operation?  I'm talking about strategy operations and assets now.  If that is our strategy, what is our operation?  How are we coordinating ourselves and configuring ourselves to achieve these?  This is where we have it wrong.  We can never go wrong with an Einstein quote, right?  Einstein also said, What is going on right now is that we have a confusion of objectives and a perfection of the means.   We are really, really, really good at creating processes that often lead nowhere.   </P> <P>Confusion of objective, perfection of the means what is happening in philanthropy is that we have, up until very recently, organized our tax strategy, our accounting strategy, our human resource strategy, and our media strategies to produce in some ways very suboptimal results.  I can give you lots of illustrations; I'm just going to pick one.</P> <P>One of the ways that we contribute to philanthropies and strategies is simply by saying how efficient are you.  I have done this myself; I feel bad about it now.  But how little money do you spend on your administration and your operations and how much goes directly to the end user - the poor person, the hurt person, the sick person.  The lower that number, the higher the probability that people will give money to them, and that is completely wrong because as we enter a world of increased complexity, we have to treat philanthropies and charities as knowledge-based systems.  But the greatest knowledge-based systems in the world software, biotech, and places like that - are spending 20 percent and 30 percent of their resources on training their people.  And yet if the philanthropy spent that amount of money figuring out how to do its job really, really well, unless it is a type of philanthropy that comes from a strong, rich person who just does all the strategy himself, they would not get any money, which brings me to the asset side of the equation.</P> <P>If we are not developing outstanding people in our philanthropies, if we are not developing informed strategy that takes timely action, if we are not doing something that is vaguely contrarian but able to have positive outcomes the morality of outcomes, the morality of profit, the morality around change instead of the means to that change then we are going to be working in a very suboptimal way.</P> <P>What we are doing at S.E.VEN is we only hire entrepreneurs to work inside our philanthropy.  People who have made a payroll, people who have had an R&D budget, people who have had satisfied very specific-targeted needs, and people who almost universally I ll speak for myself in this regard have failed ignominiously and often.  In fact, failure, which is an anathema to philanthropy, is the lifeblood of entrepreneurship.  You know why?  Because when you fail, that is how you learn.  And the best thing you can do is fail fast early on, fail frequently, and most importantly, originally, because even I ll admit that if you fail the same way twice, you are kind of ignorant, right?  But if you fail a different way each time, you actually learn the fastest, but philanthropies are not allowed to do that.  Probably AEI is not allowed to do that.  I do not know; are you allowed to fail, Nick?  If you failed, are you okay?  Case study in failure.</P> <P>Nicholas Eberstadt:  Please make sure it is not public.</P> <P>Michael Fairbanks:  That is right, there you go.  Failure is really essential to learning.  It is the lifeblood of entrepreneurship.  If we care about learning in philanthropies and charities, then why are we not setting ourselves up for experiments that might end up failing as long as it pushes us down the road a little bit farther?  You know why?  Donors will not permit it; the tax code will not permit it; management will not permit it.  This is essential to what is happening right now.</P> <P>Kim Tan takes rational risks.  In fact, I would attribute to Kim - and I have known him for some years now - is he actually does not do risky things.  He does things that other people think are risky.  But I would also attribute that he has had his failures.  He has embraced them, he has learned from them, and he has never made the same failure twice.  That is where philanthropy has to go in the future.  Keep our eyes on the prize: strong society, progressive human values and figure to achieve that with the decision rights, metrics of performance and punishment and reward systems that sets you up to achieve those things.  Because we in philanthropy do not have the benefit of price, right?  When I sold vacuum cleaners door-to- door in college, I had the benefit of price.  Someone bought that vacuum cleaner when it was priced correctly.  When it was priced too high, they did not buy it.</P> <P>I had all the information I needed about my competition, my product and my customers embedded in that one notion of price.  But in philanthropy, we do not have price.  So Mike Jensen at Harvard, a future Nobel laureate, says that you have to get the rules of the game right in organizations that do not deal with price.  Those three rules are decision rights.  They must be mutually exclusive and collectively exhaustive.  No two people should be doing the same job.</P> <P>Metrics of performance we must have intermediate objectives and final objectives, and if we do not reach those final objectives, there should be punishment.  It does not have to be draconian; it does not have to be nasty but it has to be punishment.  And if we succeed, we should be able to reward the people that created that.  If we do not get those three things right in the absence of price as a way of feedback, philanthropies fail.  What I'm hoping we are going to see in the near future is philanthropies that behave that way.  That is what I'm trying to do but I guarantee you, before we succeed, what will we do?  We will fail.  Thanks very much for your attention.</P> <P>Arthur C. Brooks:  Carol Adelman.</P> <P>Carol Adelman:  Thank you, Arthur, and I want to welcome you to Washington.  You are carrying on the great legacy of Chris DeMuth who has done such a wonderful job here.  You have probably heard the John F. Kennedy quip about Washington being a city of southern efficiency and northern charm; it is also a city where politician strolls down lover s lane holding his own hand.  And also, just so you will be able to recognize where you are, it is when you come up with all these wonderful ideas at AEI that you are going to take to the government and the government official will tell you, Gee, that thought or idea never crossed my mind.   You will strongly suspect that it did not have a very far way to travel.</P> <P>Anyway, this is your time now and we are really happy to have you here.  I also am going to just make some remarks but wanted to since Mauro -- first of all, Mauro told us to make this fun; that is the only reason I thought I would tell some jokes.  But also please feel free to interrupt and ask questions if you do because we really want to try to make this as much as possible a roundtable discussion and we will take questions later.  But if you have a question, raise your hand or just buzz in.</P> <P>As Arthur told us, I was in the government foreign aid program under, actually, Reagan and Bush I, and that is where I think I became a bleeding heart mugged by reality.  Because while I could see government aid programs doing a very good job about disaster relief and many humanitarian aid programs, government was very limited in really creating economic growth or prosperity.  Nick and I have shared these thoughts and ideas over the years and I really want to thank Mauro and Nick for putting this conference together because they are truly people that look at what can be in development.  They are looking at what the potential is for Africa and not just what the problems are in Africa, and that is what is exciting about this panel as well.  We were just talking about that prior to this.  </P> <P>And so, I decided I would then do private sector and that sort of led me to developing the Index of Global Philanthropy, which really I started off doing as a defensive response because people were calling America stingy.  And it was for this reason, right here, you can see that and because they were using this one measure of government aid as a percent of gross national income.  </P> <P>And if you look on the left, I do not know how well you can see that it is also in the index but the U.S. is actually second from the bottom in terms of our official development assistance as a percent of our gross national income.  So that people all the way from the former American presidents to U.N. officials would call us stingy.  When in actuality, the chart on the right shows that the United States has the highest absolute amount by far over all the other countries.</P> <P>But the main thing that this measure does not get at is the fact that it excludes private giving, and I'm putting into that category private philanthropy and remittances.  Okay, we are not going to call remittances philanthropy because everybody gets mad at me when I do, so we are calling it remittances.</P> <P>And as you can see, our U.S. official development assistance to the developing world is -- this was 2006 and we are soon going to have all of the numbers comparable for 2007, but the ratios are not going to change that much.  The U.S. official development assistance is 23.5 billion, which is really only 12 percent of our total economic engagement with the developing world.  </P> <P>Private philanthropy, as you can see, is 34.8 billion and, as you can see, our private voluntary organizations or charities have a huge amount there, 12.8.  Religious organizations, we were just able, this last index, we commissioned the University of Notre Dame to do a -- they were creating a national random sample and we added on some questions about religious giving because we did not have a good number for that.  We have achieved a phenomenal number of 8.8 billion, which probably to most of you who are active in your church giving or know about what church programs, are not surprised by that number but we were pleased to get some kind of number on that, and we are going to be further developing that study and methodology later.  Then remittances, as you can see, are 71.5 billion, and then U.S. private capital flows are 62.3 billion, so the private capital flows are the market investments, debt equity positions and foreign direct investment and so forth.  And this is not just exclusive to the United States.</P> <P>This next chart is really the one that I think says it all.  It starts from 1990 and goes through to 2006.  The top line, the gold line is actually both private investment and philanthropy.  In next year s index we are going to break those out but we do not have real good measures for the private philanthropy from the past and so we have kind of combined them there.  You can see the fluctuation because of the dips of the Asian economic crisis there in 97, 98, 99 and then the recession in 2002, 2003.</P> <P>The brown line which is number two in volume in 2006 over on the right is actually remittances.  It is interesting how steady they are and how they do not fluctuate very much.  The blue line is actually -- and this is from all donor countries to the developing world, okay?  And the blue line is the official development aid, the government public flows.  So when you add the gold and the brown line together, if you can do this, we are talking about private flows - that is investment, philanthropy and remittances - account for almost 80 percent of all the developed world s engagement with the developing world.</P> <P>And the reason why this is important was that this chart was completely reversed in the 1950s and 60s.  In 50s and 60s it was primarily government aid.  We had a Marshall Plan because there was no private investment; there was no private philanthropy.  And in fact, CARE started to be a social welfare, to be of social - a charity because the Marshall Plan was not going to be doing social welfare program, so none of the global NGO activities or private investment were out there.  The world has completely flip-flopped now and the developing world has changed as a result of this because all these resources going in are creating private enterprise, local talent and so forth.</P> <P>So the next point I wanted to just make very quickly was how the developing world has changed and all the entrepreneurs at this table know this because they have seen it, but it is basically the increase in open markets and open societies and, yes, there is a bottom billion and most of the bottom billion is located in African countries and some Asian countries, but there is a middle 4 billion that has developed over the years.  And many of those people are in Africa.  I mean, Africa had the second highest growth rates after Latin America.  The opportunities abound there that we are seeing -- that we feature in this index as sort of we are trying to look at Africa as the glass half full, those countries that are making it like Rwanda and Mauritius and others.  In Ghana, now, the World Bank says that Ghana is going to have its poverty rate by 2015 if things continue going well.</P> <P>There has also been a tremendous growth as we saw in the previous chart in private philanthropy, remittances and local charities.  High-net worth individuals are now contributing to local charities, which are meeting the needs locally and a lot of U.S. organizations, the savviest, are now partnering with those local charities.</P> <P>And then the third way is that developing countries have changed is the expanded knowledge and demand through technology and that is the cell phone.  It has been called the industrial revolution of the developing world and the Internet giving, social networking sites.  The cell phone is actually often being used as currency now in Africa.  When you get into a taxi and you can beam minutes to your taxicab driver to pay for your ride.</P> <P>So these basic trends have created this change that we are seeing now that has -- I'm flipping around, not in my usual order here because I want to make one more point here.  So there has been a change in the developing world and there is also then a change in how foreign aid is delivered, and that is what our guests today on this panel are going to be talking about.  This is how I categorize some of these changes.  Philanthrocapitalism has been also called social entrepreneurship, venture philanthropy, what a lot of the people here at this panel are going to talk to you about.  And that is embraced by these organizations here but many, many others that we feature in the index and that you read about all the time Acumen, Endeavor, KickStart, Writers for Health, ACCION International - many, many groups that are falling into that category. </P> <P>Business at the bottom of the pyramid is the Prahalad book on The Fortune at the Bottom of the Pyramid.  Bill Gates is calling it creative capitalism.  Your book, Mark, is talking about this phenomenon, too, I think in terms of finding places where you can invest and do business which is, in essence, the basis of entrepreneurial philanthropy as well.</P> <P>Cost-related marketing is a whole new phenomenon.  When you drink your Starbucks coffee, a percent of that is going to charity and there has just been a tremendous rise in corporate social responsibility.  And the companies, at least certainly the pharmaceutical companies, are doing more local investing, investing in local capacity, training people, doing where they can, local investments in safe ways for safe drugs and so we have seen the big rise in this as well.</P> <P>E-Philanthropy 25 percent of the tsunami aid actually went through the Internet.  It did not require a three-month government RFP and bids and all of this to get assistance out, and it was going directly from Rotary Clubs here to Rotary Clubs in India.  The cell phone, as I mentioned, is a huge phenomenon.  And finally, remittances are what we are finding most exciting.  Remittances are sort of these lost financial flow to the development community.  They were never written about until we started talking about them, and others finally then said, Let s look at this flow, because in 2006 it was $122 billion.  It exceeded official development aid and it is money that is going directly to people through wire transfer services or in people s pockets going over to countries, and we think about maybe 20 percent of remittances are going into investment projects and in non-consumption items.</P> <P>And we are also seeing now that things like the African Ex-Im Bank is actually using remittances to come into banks in Africa as collateral for making loans.  And as more remittances come into countries, we have seen instances where this has improved their credit ratings so they have been able to borrow at better rates.  We do know from World Bank studies that remittances are reducing poverty through the consumption effect.  And there are some interesting things going on with the aid development agencies now coming in and leveraging remittances money with their own money.  The Pan American Development Foundation came in and the Banco Agricola in Latin America has come in and put money into remittances raised by migrants here in the U.S. that are going into El Salvador.  There is a whole new world of foreign assistance that is happening through remittances and people are leveraging this in areas I think that entrepreneurs can look at as well.</P> <P>So with all these private giving reinventing foreign assistance - I'm going to end here the question really becomes what is government s role?  And I think, to me, it is just quite clear that we need an entirely new foreign aid business model.  One that is out there and this business model has to be one of government foreign aid recognizing it is a minority shareholder now; whereas, it did not used to be.  It is not your mother and father s government aid world anymore; it is a minority shareholder and it needs to learn how to act that way and realize it still has an important role as a leverager.  It should be coming in and putting money into these private programs or putting money into programs that governments are doing where governments are putting their own money in and that local co-investment and partnership is important.</P> <P>I think the default mode of foreign aid should be quite frankly public-private partnerships.  And in that way, government aid has a chance of passing a kind of market test because if it is giving money to a program that has already raised private money and private volunteer time, that is in essence a market test for government aid.  And aid has started doing some of this, I think it needs to do more, and this is what Nick and I were writing about in our piece in the AEI DPO.</P> <P>The other thing is that the new business model is important and then, finally, you know, how it is delivered is key but I think that the new business model is one that President-elect Obama should recognize very much so.  Because just as we are showing how foreign aid has been reinvented now through private philanthropy, President-elect Obama basically reinvented campaigning, campaign financing with lots of people, younger people using the Internet, small gifts, much more involvement by younger people and the populace in general in the campaign and communications and listening which is what is happening in private philanthropy as well.  And in essence, just like I see the whole private philanthropy and sort of the democratization of foreign aid where people are getting more involved.  It is not just big foundations or big governments doing projects that it is very hard to know what they are doing or where that money is going; it is, you know, there are ordinary Oprahs all around.</P> <P>All of our interns are giving $10 to kiva.org every 30 days and they go and they see that the project worked and if it did not work, they give to another one and they have discussions with the farmer that is growing the organic eggs.  </P> <P>So I mean this is the new world of philanthropy that is out there.  I would assume if it works on the results and the failures and the ability to take risks that Mark talked about so beautifully, that the Obama administration should see these parallels to their own -- at least what he did in his campaign and campaign financing.  Yes?</P> <P>Male Voice:  Did I hear you say that foreign aid let s say USAID because of your close affiliation with it before is less relevant than it has ever been either because of remittances and other things, or because you no longer run USAID?  But is it less relevant, yes or no?</P> <P>Carol Adelman:  I think we can agree with both of those reasons.  Yes, it is less relevant and it is a smaller amount.  It is much bigger.  It used to be a much larger share of gross national incomes and now, even on the average in African countries, the majority of African countries get less than two percent of their -- less than two percent of their GNI is from all government foreign aid so it is less important.</P> <P>I would say though that it has an important imprimatur and governments like to get government aid, but it is not where the action is.  All those private funds out there are working with private entrepreneurs, private philanthropists and individuals so it is really not where the economic action is happening anymore.</P> <P>Arthur C. Brooks:  Thank you.  I know that a lot of you have some thoughts on this and are eager to jump in.  We will open up the conversation in a little while.  We have just a few more comments from our panelists and we will turn now to Will Inboden.</P> <P>William Inboden:  Thank you very much, Arthur.  It is a pleasure to be here.  I wanted to start with, I think, a telling anecdote about how a particular concept can take on a life of its own in Washington - this goes back to my time with the government.  You will see on the chapeau for the outline of the program today, the second paragraph refers to how can reform efforts bolster the U.S. foreign policy troika of defense, diplomacy and development?  Those are sometimes referred to as the 3Ds - defense, diplomacy and development.</P> <P>Well, I have an interesting personal background with the 3D concept.  I spent 2005 to 2007 in the Strategic Planning Office at the National Security Council, and one of the initial tasks - I and my colleagues - that were given by the President when we started was to write a new national security strategy for the Bush administration in the second term.  As you may know, the first term National Security Strategy, the NSS, had come out in 2002, and for the second term starting in 2005 we are going to do a new NSS incorporating kind of lessons learned from the first four years and kind of charting the way forward.</P> <P>Well, as part of the process of drafting the NSS, my colleague and I started this sort of canvassing the broader foreign policy community in Washington, meeting with leaders from the different cabinet departments and agencies, meeting with the NGOs and the like.  And repeatedly, every time we would meet with anyone working either at the private sector, NGO or especially over at USAID, anyone working in the development space, we would hear over and over again, Hey, whatever you put in the new NSS, be sure you refer to the 3Ds just as they were in the first NSS, the 2002 NSS.   What is this?  They said, Well, you know, defense, diplomacy and development.   And they said it is so wonderful that the 2002 NSS developed this concept of the three Ds and puts it right there in the introduction.  They said, It meant so much to us and our work in development.  It helps us when we go up and lobby at the Hill for increases in the 150 Account, the foreign assistance account, and it is just this wonderful concept that finally development is part of the holy trinity of U.S. national security including defense and diplomacy.   And we would hear about this thing.  Okay, well that sounds plausible, it sounds nice.</P> <P>Then we went back and read over the 2002 NSS and realized the 3Ds are not there; they are not there at all.  I mean not even close, it was just never mentioned at all.  This is baffling to us because we were hearing from everybody, Please cite the same phrase in the 2002 NSS on the 3Ds, and we just could not find it.  It did not mean it is necessarily a bad, bad concept.  And this was sort of a real puzzle so every time we were hearing from people, Please cite it, I would say, I would like to but can you show me where the sentence is?   And they would say, Well, just go back and read it.  It is in there. </P> <P>Finally, I was at another think tank gathering where a very senior official from USAID who will go nameless was there and I pulled him aside afterwards because he had also referred to the 3Ds in the NSS.  I said, Hey, can you tell me where that is and how that concept came from?   And he said - I m not making this up - Oh, I just made that up.   He said, I just went back to my colleagues at USAID one time and said, Hey, I think the 3Ds would be really important so let s just say that it is in the U.S. National Security Strategy.   And somehow, it took on this crazy life of its own.</P> <P>And again, Mauro, I m not disparaging your chapeau for the conference here because there is, I think, a lot of truth in this particular concept.  And in the 2006 National Security Strategy, we actually did put a phrase in talking about the importance of development reinforcing efforts in defense and diplomacy because especially post 9/11, and we have all heard or given this lecture before, we understand that failed and failing states, besides being humanitarian crisis in their own right, can be national security threats and challenges.</P> <P>But anyway, as I was getting ready to leave the government, one of my frustrations while in the government had been I wished the government was doing a much better job of empowering and engaging private sector actors because one of the things you quickly learn when working in government is how relatively powerless you are, whether it is sort of the bureaucratic constraints or any number of things.  And some of them say, oh boy, we know people are doing this good stuff in the private sector, how can we sort of work better with them?  So when the opportunity came up to join Legatum where I m currently at, it was one of those wonderful providential moments of kind of finding a private sector actor that was already doing and wanted to do even more very good work in a number of areas of the holistic development space.</P> <P>I will share sort of a little bit about who Legatum is and some of the different activities we are working on, including in partnership with some of my colleagues on the panel here.  Legatum, at its core, is an investment firm.  We are a proprietary private fund.  It was started a little over 20 years ago by a New Zealander named Christopher Chandler, and he started off with just kind of a family business and then made a series of investments over the next two decades in emerging markets and soon turned it into a substantial fortune.  But along the way, through his investments in emerging markets across the globe, he started to develop his set of -- he experienced a number of failures - and again, Michael Fairbanks spoke very eloquently on this - and developed a number of lessons learned about how development really can take place, how economic empowerment can come not just to sort of elites in any given society but to the folks at the grassroots, how was holistic prosperity understood - again, Michael spoke quite a bit on that.  So Christopher decided he no longer wanted to just invest in companies but he also wanted to invest directly in people and in ideas and so he started a range of different initiatives within the Legatum group of companies, all of them centered on this concept of advancing holistic prosperity.</P> <P>I think the best way for understanding the different Legatum activities is around the framework of incentives.  Incentive is obviously a key buzzword and rightly so in development circles these days.  I ll talk about how we approach incentives.</P> <P>First, we want to and are trying to incentivize commercial capital to invest in developing countries, and we do this through our Legatum Ventures fund; it has about $100 million in investments in microfinance in India and elsewhere right now.  What we are trying to do is sort of show that microfinance does not need to be just sort of the domain of kind of NGOs relying in part on donors but it can become self-sustaining; it can attract commercial capital; it can grow in tremendous ways and you can do a double bottom line of realizing monetary profits and also improving people s lives quite a bit.  And so, we are trying to be one of many actors helping to pioneer a model there by showing that you can make a profit by investing in the entrepreneurs and in micro-financing developing countries and we are hoping to help create broader incentives there to attract more commercial capital.</P> <P>We want to incentivize all business leaders but especially political leaders - this is the second one - to think about development and prosperity holistically, and this is where I think Mike s comments earlier on kind of the range of ways to think about prosperity is a helpful pivot.  One of the things that we produced with the Legatum Institute - and we are the investing on ideas portion of the company - is the prosperity index.  We are not just measuring economic growth but also life satisfaction, subjective well-being, social capital, the quality of institutions, are people getting happier or just getting richer, and what is the relationship between the two.  And again, Arthur has done some wonderful work here and contributed in some very helpful ways to our index.</P> <P>The way we build that around incentives is we rank countries in how they are doing on promoting holistic prosperity.  It is not just enough to be growing your economy but are the levels of happiness in our country going up?  How is the environmental quality?  How is the quality of families, of institutions, of social capital?  And we ranked 104 countries across a range of 44 different indicators, and we know that sometimes it is a little bit of just sort of a gimmick or a heuristic device to produce a ranking.  We are really trying to advance the concept, but that is our way of incentivizing people to look at that more holistically.  You can see the index at our website, prosperity.com.  Australia is number one this year - it is usually one or two.</P> <P>Third, we want to help incentivize developing world entrepreneurs to dream bigger and higher to develop their own networks.  This is where we have sponsored or helped support some different price competitions.  Again, we worked very closely with Mike Fairbanks over the last couple of years on this wonderful concept he developed of the Africa Prize for entrepreneurs and basically trying to help sort of create a new framework in Africa so it is not just thought of as the popular notion that all these impoverished countries, that we just need more foreign assistance poured into them.  Well, there are some wonderful entrepreneurial and business and commercial activities going on there by African entrepreneurs and looking for ways to highlight their good efforts and, oftentimes, they may feel sort of isolated and alone, and by doing events like the Africa Prize to attract hundreds of companies applying for it and bringing all the finalists together and just helping them build their networks.  Again, Mike can share more about that.</P> <P>And then we want to incentivize philanthropy to give smarter and more effectively.  And again, many other people are doing some good work in the space who, by no means, have a monopoly on it but in our own philanthropy, we try to bring more rigorous metrics in of measuring outputs and outcomes, developing metrics of performance and not just looking at how much are we giving away but what is it actually accomplishing in people s lives and the lives of societies and helping to promote holistic prosperity.  So thanks very much.</P> <P>Arthur C. Brooks:  Thank you, Will.  John Orrison?</P> <P>John Orrison:  I want to start off my remarks by saying - and I ll keep them as short as possible - that my entire speech for today has been turned upside down by all the comments that have been made by this panel.  First, I want to put into your minds just a little seed and let it plant there and let it float in your mind.  I want you to think about what is a railway.  You can think about railways in terms of, okay, there is something out there and it blocks the road crossings and it does not allow me to get home when I want to.  But what is a railway?  It is a transportation system but it is also an economy.</P> <P>I m going to carry you quickly through my comments in terms of our present state in Africa, the past in America and the future potentials.  And I wonder why I am here because I m a railroader.  I have been doing railroading ever since I was 17 years old - that is all I have done.  I have worked for many different companies.  I went to work for Burlington Northern Santa Fe in December of 2005.  The chairman of my company, Matt Rose, is involved in the Legacy Group.  He is involved with CEOs of companies and Fortune 500 companies that get together and they talk about what is social good; they meet on a regular basis.  And he met with Paul Kagame, the President of Rwanda, in the summer of 2006.</P> <P>And Kagame came to him and said, I have all these needs.  We went through genocide.  I have these needs.  I have to have infrastructure.   And he listed, I need electricity; I need water; I need hospitals; I need schools; I need education; I need an airport; I need some roads and I think I need a railway.   And Matt Rose said, It is not whether or not you need a railway.  Should you have one or not, you must have one. </P> <P>You have to look at the economy of the United States that divided in Civil War, President Lincoln, in 1862 before the Civil War, signed the Pacific Railway Act.  He was a lawyer for railways before he became President of the United States, and he signed an act to develop the transcontinental railroads because we were divided north and south but not united to the west and what would this country be if we are divided?  We will not be America today.  And in that act, he commissioned railway companies, private companies to work with the government through government incentives to develop infrastructure, and from the development of the infrastructure, what did we develop?  We developed America.  We developed the most efficient economy in the world.  We have the lowest transportation cost in the world; 1.6 cents to move one ton of freight on mile in the United States.  What about the rest of the world?  Three to four times.  What about Africa?  The highest cost in all the world, except for Antarctica - 10 to 15 times to move a freight.  And what does Rwanda run on?  They have to import gasoline on trucks into Rwanda.  They plug them into GE locomotive engines that are idle engines and not the locomotive with a track or anything - they are just sitting there at a power plant.  Maybe you do not know that but locomotives, what do they do?  They create electricity.  Electricity runs the wheels - it is not a driveshaft thing - they are power plants.  We actually plug up locomotives to hospitals when we have problems with blizzards and things like that.  That is what they do.</P> <P>And so in all this, Matt Rose met with him.  He sends me an email and he says, Hey, John, a little extra credit.   And I could spin the world a thousand times and I would say, I m never going to go to Africa.  That is not me.   And also, when I get this email and I jumped into a movie that has been going for three years and I have been working with the presidents of countries and talking to them, I said, well, there are viabilities that have to be met.  The first viability is there is a feasible route.  You cannot build it through an ocean or a volcano.  Number two, you have to be able to have good design.  Number three, you have to have tonnages.  And number four, you have to have a legal framework, a regulatory framework to make it viable.</P> <P>And if you look at the United States, we have a model here.  We have 160 years of history.  Our experiential knowledge, what we are trying to do is give that to these governments and we are doing that, we are doing that for free.  BNSF is not going to build it; we are not going to own it; we are not going to operate it.  We are just giving them the information and the knowledge.  We are going to give them the best of agreements, the way to set it up, the way to get operators in there and build it but the change factor that is going to occur is that if you build a railway in Africa, it is completely different than let s just give money, let s invest and give.</P> <P>So I can give money for spiritual returns so I give money to church.  I give money for social return because I would like to be in a social community.  I can give money for an economic return.  If we give money for an economic return, we will get the other three.  We will get all of them; we get the spiritual, we get the social, we get the economic.  And you build a railway in Africa, you will build a town.</P> <P>I just want to take you in a movie in the past.  They started to build a railway across Nebraska.  I was in a conversation.  The representatives of Nebraska said, Why would the American government ever want to do something in Africa?  What about my constituencies?  Why do they care about Africa?   I said, You would not have any constituencies in Nebraska if you did not have a railway because the railroads were built westward where they built the cities and the towns, and the constituencies that exist west of the Mississippi River were built by the railways. </P> <P>You have to go back in that history and think about it.  The railways were built.  There were no people there.  They went to Europe; they brought in agents to recruit people to come; they gave them incentives; they put them into those communities.  They built a town; they built a hospital; they built a well; they built the hospitals; they built the schools; they built the factories; they built the economy.  And today, that is why Denver -- name every city west of the Mississippi River, those cities exist because the railways were there to develop and exploit those opportunities.</P> <P>Where I m at in this project is we are moving forward.  The U.S. government has helped BNSF this year.  We went to USTDA.  We were able to get a grant.  The grant is almost $1 million; it is $950,000 to help us because we have spent quite a bit of money ourselves in trying to do this project.  We are looking for taking this project from a feasibility study to a development stage.  We are looking for people that are interested in investing and working with this.  And you think about it, okay, whatever your intent is, if you build a railway, you have all these other activities.  And so as we are moving the project along, we are trying to basically bring every constituency that would want to be involved in this into that attitude.</P> <P>When you think about foreign aid business models, I want to say it is not a level playing field.  There is a real problem with this because we do this through the United States government and a U.S. company and from the USTDA, it is foreign goods and services.  We would like to export G.E.; we would like to put locomotives there; we would like to put technology there; we would like to put training there; we would like to use our standards for the railway.</P> <P>Well, when you buy a railroad, they have different standards, and guess what, they are not the same.  The Chinese railway is not the U.S. standard; the German railway is not the U.S. standard.  And so those countries and their governments are able to mobilize quicker to get their influence into these governments and say, Buy our railroad because it is what you need.   And the governments do not understand that so they say, Yes, I want a railroad.   They want visible proof that it is being built.  The Chinese come in; they do a deal; they build the railway.  And it is one of this zero down, no term until the 15th year and that is past the political season of the current candidate then, guess what, everything balloons at the end and it is not viable because they built the wrong gauge in the standards and it is not the right weight.</P> <P>And so, we are in a war.  Literally, we are in a standards war and this is what BNSF is trying to do.  In Africa, if we can actually get an American railway built, one of them built and show there is a going to be a viable railroad, we can change the entire footprint across the globe because they are going to abandon these German railways and these Chinese railways.</P> <P>There was a Chinese railway built in Tanzania and Zambia in 1976, it is now non-functioning and bankrupt.  Brand new, brand new equipment and everything, but guess what, it is the wrong standards and if you do not put in -- and because we develop railways by private companies in the United States, we have maximized everything - how many tons can we put on it, how high can we make it, how long the trains - because we are for profit.  I cannot deal with failure, I m sorry.  If you talk about failure, I m a business person, if I fail, I m out.  So I m not in it for failure, I m in it to 162 years of railroad history.  Get over there, do it right and get it done and do it as quickly as possible but we have to be able to move this model quicker because right now, I think everybody gets stuck in process and we do not get anywhere.  That is it.</P> <P>Arthur C. Brooks:  Thank you [audio glitch].  Continuing in the commercial [audio glitch], Kim Tan.</P> <P>Kim Tan:  Thank you, Arthur.  I m not going to speak about philanthropy at all.  I m going to talk about something beyond philanthropy which is into the venture capital world because I think that Africa does not need aid.  It needs jobs, it needs real investments.  And so we are calling it social venture capital but we see it really as a transition to the day when it will be just pure venture capital where we would not treat Africa any differently than we would treat any other country, that we would just invest purely because there are great opportunities down there.</P> <P>I became disillusioned with my own philanthropy about 12 or 15 years ago and in Africa, I began to think about how to use my business skills as a venture capitalist to invest in building businesses.  I also come from Asia and as you know, the Asian economies, the Asian tigers have not received, have not been the beneficiaries and recipients of aid over the years and yet through pure enterprise, they have managed to transform themselves - the countries of Singapore, Hong Kong, Taiwan - and so on and on we go.</P> <P>One of the key features I think that we have learned from 30 to 40 years of economic development in Asia is the importance of the small and medium-sized enterprises.  I think there tends to be confusion that when we talk about enterprise, we are talking about the big multinationals that have pretty bad press often in the West because they are seen to be running sweatshops in the developing world exploiting the poor and so on - that is a different issue.  But in all economies, the backbone of economies is really the small and medium-sized enterprises.  They represent 90 percent to 95 percent of all our companies.  They create more jobs than the big multinationals.</P> <P>And that is the missing middle in Africa that needs addressing.  If we are going to see real development in Africa, we do not need the really, really big projects because the problem with the big projects is that they are inefficient.  You attract a whole load of unsavory characters who want to sort of come and tax you; the whole rentals all over the place.  Neither are the real micro projects going to do anything.  We are funders of micro credit and so on, and we really see it as a way to cash flow the poor.  It is a very efficient way of lifting people out of abject poverty into normal poverty but they remain poor.  And what is missing is this missing middle that needs addressing, that needs capital, that needs the entrepreneurs, that needs the human capital putting it in.</P> <P>And so, long story, I ended up in South Africa building a safari game park in one of the poorest parts of South Africa called Kuzuko.  It is a 40,000-acre park that is now being incorporated into the Addo Elephant Park, which is the third largest national park, and using that as a way to stimulate economic activities in the area.  We are in a region of about 87 percent unemployment, almost 30 percent HIV positive - it is just a kind of hopeless region where no amount of aid was going to make any kind of sustainable difference.  This is now up and running, it is functioning, it is a five-star lodge and our strap-line is, Help the poor, come on safari.   So do not give aid, do not give us charity, help the poor, come on safari creating jobs, impacting people and creating a stimulus to the local economy.  We have been the largest investor in that region for the last nine years.  We are the largest employer there and we now have a responsibility to try and bring other economic activities into the area.</P> <P>And then about five years ago, I met up with a group of other like-minded entrepreneurs like me in the U.K. and we formed a solution network called the Transformational Business Network.  We are now about 1500 people in the network with about 200 active business people, and these are guys and women who are in business and were just getting on planes, using our own resources, using our own money going out to countries that we have passion for, building businesses using our skills and our own resources.</P> <P>And as of today, we probably have about 30 to 40 different businesses around the world sustaining now about 7000 jobs or so and it ranges across the sector.  In Cambodia, there is a project there that takes women who have been trafficked, put them through a pastoral program and then we put them to work and they are working in a soya bean factory; they are working in catering; they are working at a textile contract house and that program now currently employs 600 women.  We have a taxi company and about to buy another taxi company where we are going to expand from 160 taxis up to about 2000 taxis and these are owner-driver taxis so that at the end of three to four years, each driver gets to own his own vehicle.</P> <P>And the great thing about that is I think one of the things I have learned is, in the 12 years I m engaging and investing, that giving people a job is just the first step to lifting them out of poverty - it is a big step.  But to really lift them out of poverty, I think what we need to do is to help them build capital, and that capital can be in the form of intellectual capital through education and through upscaling.  And so when we help one of our AIDS orphans whom we have employed to take his driving test four times because he failed three times, that is helping him to acquire intellectual capital.</P> <P>But in the venture capital world, we are very used to incentivizing people with equity, with stock options and making our employees and our staff stakeholders so that their interests are aligned with our interests as investors.  And so, we have done exactly the same in our businesses.  So we think about how we are going to help our staff become shareholders in the business, not to give it to them but to say this needs to be earned, these stocks will be vested in exactly the same way that we structure it for our own people here when we invest in the pharmaceutical world.  So helping the poor build capital really has become really an important thing.</P> <P>And so, we have a variety of activities from Africa to India, to Cambodia and these are now just people who are just running businesses, who are going out to do things using their talents and using their finances.</P> <P>There are some thoughts I would like to sort of throw at you because I speak as a U.S. citizen.  USAID, I think, has been important but I hear a lot of Africans saying to me, I wish the NGOs would get out of our countries.   I hear that an awful lot now and I think there is a lesson that we need to sort of learn from that, we need to hear that.</P> <P>I think maybe instead of just giving, what we are saying to high-net-worth individuals, to those in the private banks and so on, rather than giving, allocate part of your portfolio into investing - invest.  What is missing is really capital, private capital for that missing middle.  And we need to provide and create various vehicles, social venture capital funds, which one of my colleagues is developing and creating, or private people like me using our own money and some of you can do that too.  Or as another vehicle that we are structuring now is to list one of these companies on one of the exchanges so that we can then promote that as a listed vehicle that will make it easy for people who do not want to go to Africa necessarily but from their own check and say, I want to do something but rather than giving now, I can invest through these vehicles. </P> <P>So maybe that is the next way.  Beyond philanthropy, we can start to see real investment because there are huge opportunities in Africa - huge opportunities - and we should stop treating Africa differently to any other part of the world that there are opportunities there.  Thank you.</P> <P>Arthur C. Brooks:  Thank you.  You will notice that we have gone over the scheduled time before lunch.  The last panel went a little bit long.  I assure you will not miss lunch; that is waiting for you.  So, if we go a little bit long, you will not [audio glitch] with your meal.</P> <P>Rather than having an internal conversation up here in the panel, I know some of you want to jump right in and I do want to make sure that we reserve time for that so I would like to turn right to the audience who can start a conversation with our panelists.  If you could wait for the mic, if you could put your hand up and then I will acknowledge you, wait for the microphone to come and at that point, if you could say where you are from and then give us your question.  Thank you.  We will start right here, sir.  Yes?</P> <P>Male Voice:  I m from Norway and Sweden.  I m involved in a project with UNESCO, a part of my work [audio glitch].  Thank you very much.  To me, it is very relevant what you are saying.  I would start with your comments regarding standards in the government.  Allow me to be very provocative to start to make the case.  Most of you are former distinguished government officers and I m very impressed by that.  Do you know what is the difference between your situation and Russia, for example?  I m very provocative and it makes a lot of sense in many countries.  None of you will have the opportunity to have one more speech like that in those countries and this makes a lot of sense.  We talked about standards.</P> <P>So coming back to government role, it is not a matter -- and after working with UNESCO, European Union, in Scandinavia, in Japan and South Africa, it is a matter of standards including values.  Now, in concrete terms, in Africa, Africa is going through this disruptive process.  Competition from former colonial powers now is complicated by European Union and by other Arab countries and so on.  I think in everything we are discussing, the U.S. government has the qualification, the experience not in terms of amount of money but how to work out some coordination to come with some standards from business developments, from education.  And in my project, the UNESCO project in tandem with MacArthur Heritage, I m involved also with World Digital Library program by the Library of Congress.  The Americans did not want to be part of it at the beginning but now we need the Americans - that is what I m working at.</P> <P>So my main message is could America work more on defining the standards of next step in development business standards, education, holistic approach?  So I will not elaborate this but it is not a matter of amount of money but strong ordinary resources you have, the knowledge and experience, and it is the most needed now.</P> <P>John Orrison:  I ll see if I can touch on some of your points and I ll pass it to the rest of the panel.  What we are trying to do is we are trying to take the governments - and I m talking about presidents of governments and ministers of governments - through history to understand how would you actually think about and consider standards and compare and contrast different systems with each other.  And what happens is, of course, the Germans developed the original railway in Tanzania in 1910 to 1914.  They had left to make war in Europe and never came back but they put in a one-meter gauge.  And you have a 1.067 meter gauge which is Cape gauge in South Africa.  In United States, we have a standard gauge.  In Russia, you have a five-foot gauge; it is actually a wider gauge.  But what we have ran into is the fact that if you do not get the standards right, you do not have the economic and viability of the operation from a business perspective.  And so in this, what can we do?</P> <P>Well, it is really hard because I looked at the Chinese government, I feel like they have 100-year strategic plan in Africa.  They are going into these countries and they are doing this I ll give a railroad for your cotton.   So that is what they did.  They got a railroad and the railroad starts and it goes bankrupt but they got all the cotton.  All the cotton used to go into the mills in Africa to make shirts or fabric.  Now it is going raw back to China; China is milling the cotton.  It is coming back to Madagascar and they are weaving it into uniforms; they put it on the hotel.  The Mayflower Hotel over here, they are wearing a uniform from Madagascar or from Zambia or whatever.  They are doing the sewing but what they have done is they have lost that piece of their economy because of what happened just in terms of the approach with the governments.</P> <P>And I m thinking the only thing we can do here is, as business leaders, we can bring in our business sense and make recommendations to the government but it is going to be up to the sovereign to decide.  And there are so many different influences that I feel that I m in a weak position to actually change the outcome in some of these aspects.  And so we are actually having a battle right now with the Germans because the Germans are in Africa advocating a German passenger railway for a freight economy which is going to be actually not viable and it will go bankrupt.  We have told them, If you would build to our standards, guess what, you can get a private equity return of 30 percent, but if you build with the German standards, you get zero.   And so, what we are trying to do is trying to tell them these things and go through this but it is a very difficult issue to be accomplished.</P> <P>Arthur C. Brooks:  Yes?</P> <P>Aubrey Hruby:  Thank you.  My name is Aubrey Hruby.  I work at The Whitaker Group.  My question is also for John.  On BNSF, you are world class experts on railroads and you are talking about the opportunity at 30 percent return potentially on freight operations.  Why would it take President Kagame meeting your CEO and getting kind of a personal commitment to go look for their -- why is BNSF and other railroad companies not scouring Africa looking for these opportunities?  Why are the potential returns on these investments not driving the corporate interest outside of philanthropy, outside of corporate social responsibility, outside of social venture?  In all these, why is the market not doing it itself?  And what are the real risks or the real obstacles that you see having been on the ground now preventing companies like BNSF from getting involved?</P> <P>John Orrison:  That is a really good question.  We have these things called shareholders, and the shareholders want the company to focus on their core competencies.  And then we have this thing called stock and stock price.  And the stock price is basically reflecting the value of the corporation, the future potential and its current environment which is for BNSF, we are a U.S. based company, 28 states, we also operate to Mexico and Canada but the risks are known and the stock is weighted around a factor of that environment.  If you add a foreign environment to this stock, it is going to change the P/E on the stock because there is a foreign risk.</P> <P>And I have been through this; I have been through this with other corporations.  Let s say, okay, CSX, I worked as the vice president for many years.  We went into both Europe and to South America and also in there goes, okay, we are going to change that factor because we are doing something different.  So there is a lot of fear for a U.S.-based corporation to acting internationally.</P> <P>Now, when you think about like a Halliburton or Bechtel or others, they were developed in those environments and so their stock and their portfolio and their weight factors are all factored around them working in foreign environments and actually developing those.  For us to actually go over there and start to do something in Africa, someone is going to say, Well, wait a second, what are they doing?   And so there is a change wall [sounds like] that you have to go through.</P> <P>Now, we are 162 years old, okay.  Three hundred ninety companies form our company.  We have acquired, we have gone through plagues, we have gone through nationalization, we have gone through bankruptcies, we have gone through depressions, we have gone through everything - everything.</P> <P>Male Voice:  It sounds like a lot of failure.</P> <P>John Orrison:  I know.  Okay, we have gone through a lot of failure but I m saying we are a for-profit to find the truth and I guess I ll weigh it out to you that where are we going to be in 162 years from now?  We are going to be a national railroad system, we will be transcontinental, we will be hemispheric and we will be global.  How do we get there from now to the future?  We have to take steps and that is really where we are at.</P> <P>Anthony Carroll:  Tony Carroll with Manchester Trade.  Carol, I would like you and Kim to think about this.  Money remittances are huge and often underappreciated inflow, as you have pointed out, but they do not get the multiplier effect, they do not get the traction that they could otherwise create because often, they go in on a very limited basis.  Sometimes they result in shops, sometimes they result in new homes, sometimes they result in school fees but they do not often really try to create investment opportunities beyond a very small circle.</P> <P>However, the reason is because many investment remittances do not find a way to get their sort of risk expectations covered in an environment where you could actually lay off some of that money into something that like Kim is creating.  So the idea here of using remittances to create and maybe flow into a fund, which, as a remittee, I might say I do not mind putting $20,000 into this because I might get a return but I ll also have my double bottom line social improvement.</P> <P>We are trying to work on that through farm access - one of my clients out of the Netherlands - to try to create money remittances as a pool to ensure people private health insurance in countries in which we operate.  So if you are a Europe remittee in Chicago and you want to insure your aunt in Dakar - and we have an operation there through an HMO - you can go to the remittance office in The Loop in Chicago and give us $200 and we will insure your family for the course of the year, providing them a set schedule.  So we are getting more traction by scaling up the health services in these economies by creating the capital that you can create now abilities of addressing chronic illnesses, things that you could not otherwise or the public health system address.</P> <P>So here is an opportunity for you to create a window here to sort of how do we capture some of these remittances into an investment vehicle that we can trust and is transparent and get more traction which has not really I think resulted -- has created the opportunity that that money [audio glitch].</P> <P>Arthur C. Brooks:  Thank you.  Carol, do you have anything you want to say about that or you want to move to the next?  Okay.  Bob?</P> <P>Bob Hershey:  I m Bob Hershey [phonetic], I m a consultant.  You had mentioned the use of the internet in some of these projects and I want [audio glitch] how that is working out as far as holding meetings online and getting [audio glitch].</P> <P>Carol Adelman:  -- from people like Dennis Whittle who started globalgiving.com and the Kiva people and Facebook.  Facebook has a thing called Causes where people recommend their charities and you can give.  I find it very transparent and it has that whereas a lot of government foreign aid does not.  I know with the work that AEI has done on malaria, the Roger Bate system where he could not even find out from AID where was the malaria money going.  I mean, they could not even tell him.</P> <P>Here Dennis tells me that a Kansas farmer that he had was giving money to Madam Ruwanza [phonetic] in Nigeria for her farm and he did not like the way she was growing her chickens and he said, You are not producing those organic eggs right.   So he withdrew the money, gave it to another.  And then he started a conversation with her and got his other farmers to talk with her.  And so, you have this networking going on.</P> <P>And also, you need to get on these blogs, you need to be on Twitter, on online blogs, all the social networking sites because when the Burma and Myanmar disasters happened, we were finding out how the private aid was getting into Myanmar and China and it was way beyond the government aid.  The internet through the blogosphere and through these more formalized philanthropic giving sites is transparent.  They are fast; they are more efficient.  Kiva, it is a voluntary donation of 10 percent.  Dennis Whittle is charging 10 percent, whereas your government contractor is using your government tax dollars charging 50 to 100 percent overhead.  There are all these reasons of internet giving that we are seeing that it is really very exciting.</P> <P>Nadia McConnell:  I m Nadia McConnell, U.S.-Ukraine Foundation.  I just wanted to share a model that we have been using successfully in Ukraine that we hope to extend to the Baltic-Black Sea region and it focuses on the local level.  And I know there has been some discussion about getting local buy-in but I think most of the time you are talking about the national government.  As the gentleman pointed out, sometimes that could be problematic.</P> <P>When we talk about local level, we are talking of municipal level and creating a network of - let s say, what we did - reform-minded mayors who then can work with their national government and empower them.  And the buy-in also comes in from U.S. communities that we partnered - Omaha, Nebraska and Birmingham, Alabama.  The funding stopped several years ago.  They are continuing this relation [audio glitch] U.S. communities want to internationalize their communities so they are continuing even after the funding has stopped.</P> <P>And I know in the report, Carol, you mentioned the peer-to-peer, the practitioner, the mayors to mayors and city managers to city managers.  I just would like to share that because I would like to see, have you explored the municipal level in development?</P> <P>Carol Adelman:  Yes, I think when we talk about this chart, I ll just put up real quick - what the new foreign aid business model should be is competition for demand-driven ideas in local ownership, partnership, peer-to-peer, co-investment.  This is not just applying to private entities.  I mean it is still very important if a project, if there is local demand and an interest in local co-investment whether that is a private enterprise or government because there are legitimate government services that these countries have to have that these should be the criteria for the government aid to go into.  And municipal mayors or the municipal level is extremely important in that good governance but there has to be a commitment by them.  They have to be co-investing with you and that is what is mainly lacking in, you say, development programs.</P> <P>Arthur C. Brooks:  We are going to take two more so we can get to lunch.  We have one right here.  Go ahead.</P> <P>Peter Lichtenbaum:  Hi.  I m Peter Lichtenbaum with BAE Systems.  As an employee of a major corporate company, I m interested in what Carol was talking about in terms of the social -- in the equation of social objectives into business planning.  In other words, what are the ways in which a major corporation can try to achieve some of the great objectives that you all were talking about in a business context?</P> <P>I have looked at a couple of the books that I think you referred to - Philanthrocapitalism is one and Creative Capitalism another - but what I was interested in is whether there is a site that collects literature on this in what has worked and what has not worked.  Reading those books, it is a bit of 30,000-foot and short on the lessons learned, how to do it, what not to do.  So if you or any other members of the panel have thoughts on resources that are out there to help major corporations think about getting into this blending activity that would be really helpful.  Thank you.</P> <P>Arthur C. Brooks:  Mike, did you have a comment that you want to make before we move on?  To respond to that and certainly I think that I would like to invite you or anybody to have access to our panel afterward, and I think that any of our panelists could probably give you some good resources.  I m sure that our panelists would welcome contact from you after the event such that you can get the information that you need.</P> <P>Michael Fairbanks:  I would like to respond very briefly to what you are saying.  This is very much inspired by Kim s experience in life which is, you know what, why are big corporations doing so much philanthropy anyway?  Just be a big corporation and do what you are doing, invest in people and train them and build products and meet unique needs and create shareholder value.</P> <P>I had this discussion with the senior people at Google and the Google Foundation, they are so innovative on the corporate side and so just like everybody else on the foundation side and I said, Excuse me for putting it this way, you are God damn Google.  Do Google.  That is the only thing you do better than everybody else.  Why do you not invest in training people to do Google-type stuff in Africa?  Why do you not develop products for Africa?  But you are God damn Google, just do Google.   And they had a very predictable response to that but that is the way that you need to think about it.</P> <P>While I have the floor, I really commend this book to you.  It is by a guy named Dan Pallotta who is a very controversial figure.  He wrote a brilliant book.  This is one of the few times I have read something I wish I was smart enough to know the stuff and write a book like this.  I think Carol very ably has described a point of inflection in the history of foreign aid and philanthropy and corporate relationships with the rest of the world.  And this book in a few years, we might look back and say this was the iconic book that described that time, so Uncharitable by Pallotta.</P> <P>Arthur C. Brooks:  Thanks.  And our last question before lunch?</P> <P>Samar Chatterjee:  My name is Samar Chatterjee from SAFE Foundation.  I also work as a consultant with the U.S. Environment Protection Agency.  My question is to Ms. Adelman that you have added this private philanthropy or I would like to call it more like private venture capitalist this gentleman has called because I work for an organization which is considered not-for-profit charitable organization but they do run their shop like lean mean American corporation, and there is nothing wrong probably, they are all businesses even though the objective may have some charitable aspect to it but they run it like a business.</P> <P>And you mentioned that there have been people around the world calling American contribution, the governmental contribution as little stingy or probably frugal and probably that is because America has the ability to spend far more amount on war killing people and that has been one of the reasons so many people have said that, Hey, you spend so much money doing all this.   And then on top of it when you add the 3D to the charitable work, then that becomes even -- those are businesses to do 3D which is part of American diplomacy and some of them are not very kosher to be honest.  So given that, was that a second thought to increase the amount?  Thank you.</P> <P>Carol Adelman:  Well, I do not think our military or defense is out there to solely kill people.  Occasionally, we have to kill to defend the world.  Our military is a phenomenal deliverer of disaster relief.  I mean during the tsunami to station those carriers, everyday was - what, Jeri, a couple million dollars?</P> <P>Jeri Jensen:  Several million dollars.</P> <P>Carol Adelman:  Several million dollars everyday and nobody really looks at when these huge disasters come in peacekeeping areas where the military is building clinics and schools that are being used by the local populace as well.  And that is a big discussion, how much role should the military have?  So they are doing very, very good things.</P> <P>I think the notion of -- I think if anybody thought that we could show that foreign aid clearly had an impact on economic growth and prosperity, I think even Nick and I agreed on the HELP commission that we would be in favor of increasing that money once we could see a model that worked along those lines.  It has clearly been good in relief in many humanitarian programs that you have heard about today with HIV/AIDS and TB but whether the developing world can even absorb this additional money, this 0.7 percent was really just a percent pulled out of the air as the good economist at CGD have pointed out.</P> <P>And if we did, if the U.S. reached the 0.7 percent, these expenditures will be the second largest expenditures after our Defense Department.  So I mean that is clearly politically impossible and most of the economists at the IMF argue the inflationary impact and the ability to absorb that would be ridiculous.</P> <P>We just have to get real about this.  It is not about the dollars of government foreign aid or the boxes or more people; it is really about what works and how government foreign aid has to learn how to transform itself to be relevant in today s change developing world and where there are whole new ways of delivering aid that are much more efficient and all new financial flows out there.  So I think that is the question - the way we should leave this.</P> <P>Arthur C. Brooks:  Please join me in thanking our guests.  On behalf of our panel, I would like to thank all of you for coming today and for the organizers of this conference and enjoy your lunch.</P> <P> </P> <P>Exercise: Security and Development</P> <P>Thomas Donnelly:  If everybody could munch as quietly as possible, we will get started, also so we can conclude in a timely fashion.  This is the final session.  I hope it is not only going to be a nice digestive and dessert for the conference but it is also going to be something of an experiment in think tank theater.  So I m going try to explain how the process is going to work.  Rather than just having a panel, particularly a panel of seven where people give presentations and lectures and we get response from the audience, we are going to do what I would call a non-crisis simulation in the sense that the conceit for this event is that the folks here are the staff principals of a new country team assigned to Nigeria, to Lagos.  We have just gotten off the plane from Washington here in Lagos.</P> <P>I will be playing sort of both the role of moderator and ambassador with marching orders from the President not only to develop a coherent policy implementation approach but also to run meetings in an efficient manner so I will run the proceedings with an iron fist inside a velvet glove.  So I have assembled my staff principals here who are going to advise me on this and we not only have the people who are going to be working within the country team but we have in the person of Samantha Ravich, our fairy godmother from the White House, whose job it is to make to sure that we do not veer away from this present state of policy but also to figure out how she can protect this fragile experiment in development and security back in the Washington Hothouse.  </P> <P>And we also have our senior statesmen adviser, minister, even more plenipotentiary than me in the person of Paul Wolfowitz.  So Samantha and Paul will have license to intervene in the conversation, and we really want to have the conversation as a way to work out what we are going to try to do to accomplish a new approach to Nigeria, which I will just lay out.</P> <P>None of us are Nigeria experts in the way that so often people called upon to take on such assignments are not necessarily area experts but, particularly our panel whom I will not introduce in excruciating detail - you have their biographies in the program - are deeply experienced in the kinds of efforts that we are going to be talking about.  And your role, dear audience, in this is to sort of act as the rest of the staff.</P> <P>So the way we are going to do this is that we are going to sort of pause after each presentation.  My colleagues will all discuss it first amongst the panel but then we are going to turn to the audience, again, not for counterarguments or kind of statements but as a way that we can better achieve the goals that we have been tasked.  This is also a way of trying to tackle as the headline or the title of this panel suggests the increasing interconnectedness between security efforts and development efforts.</P> <P>Our experience over the last five or six years, particularly in Iraq and Afghanistan has been to relearn at some painful cost the need to integrate, as the pundits would have it, all elements of national power in a coherent and comprehensive way.  And the security efforts, the development efforts, diplomatic efforts, economic development and such like should not exist in their own stovepipe or in a vacuum but can only be really effective of American strategic goals when they work together.  Now there has been a lot of ink spilled about this subject in Washington and a lot of it has basically been about how to rewire the Washington bureaucracy to better accomplish this.</P> <P>About six months ago, we at AEI tried to figure out how we could contribute to this conversation and we thought that actually our recent experience and probably the most effective way to do this was to concentrate on the level of the country team.  The principle being that a bottom-up approach or an on-the-ground approach was likely not only to be more immediately effective and less bureaucratically cumbersome in the sense of having to go trough the immense reform efforts that would be necessary to redefine the entire national security architecture and it would have an effect faster and it is really where the measure of success is achieved.  Again, you could define the perfect interagency process in Washington and it would not matter if it was not helping people achieve things out in the world.</P> <P>So we produced this report, The Frontline Country Team Report.   Some of the panelists actually contributed to this effort.  Again, we put it out about six months ago.  I believe there are a number of copies out there to take away for those who were engaged and think this is an idea worth thinking more about.</P> <P>So that is the background and so with that, we will now begin.  It is my job not only to moderate but to set the terms of engagement.  So I have sort of invented out of whole cloth a Nigeria policy and strategy and it is, as you will see, very general and very reflective of the fact that my Nigerian knowledge is limited but I do know the following.  It does seem, obviously, the United States has a number of compelling and consistent long-term interests in Nigeria not in any necessarily prescriptive order but certainly ensuring energy flows from Nigeria is really critically important to the United States.</P> <P>About a sixth of our imported oil that we actually consume comes from Nigeria.  Many experts believe that proportion will rise and certainly exports, oil exports, are important to Nigeria itself.  The Niger Delta accounts for about 95 percent of Nigeria s foreign exchange earnings so that is a big deal.</P> <P>And so it is important for the United States to sort of maintain the unity of Nigeria - that has sometimes been the issue - to enhance the legitimacy of our government that always has not appeared entirely legitimate to its population that has been the target of military coups in the past.  And of course, to maintain some sort of regional stability throughout West Africa, in particular helping to end religious violence, which has been problematic and endemic, and regional divisions within the country to sort of pacify and reconstruct the Niger Delta region which has suffered through very difficult times.  Try to tamp down government corruption and to encourage reform and governmental transparency and buttress a fragile but I think a genuine democracy.  Keep the military out of domestic politics and enhance Nigeria s ability to control its own territory, its sea space and its air space.  So that is the kind of the overall strategic guidance that the team is meant to try to identify tools of government policy within the various agencies to try to achieve those goals.</P> <P>We also want to promote I think Nigerian leadership within West Africa.  It is weird for us to talk about this but as we have always wanted to preserve the favorable balance of power in Europe or in East Asia, preserving the happy balance of power in Africa is something that Americans are coming to think about, and to promote Nigeria as kind of a responsible stakeholder in the international community.  This means helping to resolve disputes with Nigeria s neighbors or helping in encouraging the Nigerians to do so such as with Cameroon.  To improve relations more broadly with the Francophone states in West Africa and to encourage and help Nigeria to assume a leadership role within the ECOWAS organization.</P> <P>Nigeria is kind of a natural sub-Saharan just by potential wealth and population, a great power in the way that South Africa is or Ethiopia is and again, it is worth promoting Nigeria as a regional leader or a leader within the African community or within the A.U.  Because Nigeria is kind of a fissure between Islam and Christianity and because there has been increased presence of Islamic radicals in Northern Nigeria, clearly that is important to the United States that Nigeria remain an exemplar of a society that is not driven by sectarian strife that will require some effort.</P> <P>Nigeria has also been and excellent contributor of peacekeeping operations throughout Africa.  It has been also a sort of spotty contributor in the sense that sometimes its contributions have been better than in other cases but again, it seems to me that as we promote Nigeria s role as a responsible international actor that helping them contribute to PKO operations is a good thing and, of course, we try to limit the environmental degradation that has already proceeded at pace.</P> <P>Therefore, we have been charged to build a more robust strategic partnership with Nigeria.  We need to deepen our diplomatic engagement with Nigeria directly but in a regional context - both - and in a continental context and I think also sort of globally as well.  We want to help deepen democratic practices including human rights and press freedoms.  We want to expand and diversify trade.  We want to target or find a program of development and development aid that strengthens and legitimates the central government, which is somewhat weak not only in practice but structurally and particularly, among the disaffected communities in the North and in the Delta.  Finally, we want to enhance military-to-military ties, to reinforce civil military norms, enhance the military effectiveness of the Nigerian forces in homeland defense, in counterterrorism and in peacekeeping operations.</P> <P>So in a nutshell, that is the basic task that we have, and before I proceed to the panel - and will go in the order as the way we are seated - I toss that out for addition, subtraction, correction, complaint.  All right, so moved as the kind of [audio glitch] I like complying in a pliable and - [cross-talking].</P> <P>Paul Wolfowitz:  It seems to me though that you have kind of left out sort of the big one in a way which is you have talked a lot about U.S. interest.  Let me put it in two different ways.</P> <P>First of all, you talked a lot about U.S. interest.  One might think from this long list that the U.S. is the former colonial power in Nigeria and providing $2 billion of assistance like we do in Egypt and 150,000 troops like we do in Iraq but in fact, our influence is pretty limited which takes you to the second question which is, are we promoting U.S. interest or a broader Nigerian interest?</P> <P>And then my final point would be what I think you have left out which is crucial, what is our interest in Nigeria s economic development, because I would argue that that maybe the most important thing not only for Nigeria but as an engine of growth for the rest of Africa.</P> <P>Thomas Donnelly:  My response would be that --</P> <P>Paul Wolfowitz:  And you can send me back to Washington.</P> <P>Thomas Donnelly:  No, no, no.  Not without preparing an evil reception for you when you get back.  That shall take some time.  [Cross-talking]</P> <P>Some of this is just the gamesmanship of the simulation.  I chose Nigeria as we chose Indonesia in the case study that we did in the original study because it is naturally an important country, and while certainly our past level events on some track record in Nigeria is spotty and it seems to me it fits the profile of a country with which we should be engaging.</P> <P>So I guess what I m assuming is that we have all suddenly decided that somebody woke up in Washington and said, Hey, Nigeria is like really important and we need to get on top of it.   And so there is a certain amount of just simple gamesmanship that I just really acknowledge and I hope people will sort of suspend disbelief for the purposes of the exercise.  But again, I would say there is a substantive argument there in the sense that within this context of rather than responding to collapsing states or intervening where we must, the purpose of this is to provide a tool for preventive intervention and a tool for intervening in a way that it will not be disruptive.  You want to find the sweet spot where American interest and Nigerian interest coincide.  Again, it is meant to be a strategic partnership which means that the Nigerians have a vote.  Again, the premise should be obviously we must take U.S. interest as our point of departure but we cannot come in and dictate we have to understand that.</P> <P>So one of the reasons that we want to through this exercise is to find tools that would be acceptable with the Nigerians, help them go both where we want to go and where they themselves want to go and a way that will again find that sweet spot where our interest and Nigeria s interest coincide.  So that is the best -- and as you know, Paul, I m asking you to sort of grade our paper when we are done.  That would be a pretty good standard by which after we go through some suggestions about how we could do that, do we impress ourselves with our own work?  Do these things sound like things that will, again, not only achieve our interest but appear to Nigerians as something that they would like to participate in?  Have I sold everybody?  Well I m such a good staff [inaudible].</P> <P>Larry, why do you not kick us off and describe some steps we might take both diplomatically and developmentally or anything where you want to achieve these goals?</P> <P>Lawrence Crandall:  I must say this is a very interesting exercise.  I have sat on a number of country teams as I suspect some of you have, and one of the exercises that I had to participate in many different countries was putting together the embassy strategy that would sort of guide the decision apparatus in the chancery for the following year.</P> <P>My experience with those exercises is not particularly positive.  I always thought that the embassy sort of felt like or was guided to be responsive to a lot of the constituent elements back in the State Department; that is, if you did not have a page or two in there that would satisfy the INL crowd, you would be in trouble; or if you did not have something in there that would take care of PRM, you would be in trouble; or if you did not have something that spoke to the peccadilloes of your assistant secretary that you knew well that your strategy statement might not be well received.</P> <P>These documents were sweated [sounds like] over day after day after day usually with the DCM and the political counselor or whoever were taking the lead on them, and as soon as they were sent back into Washington, a couple of meetings would be held and then they would be very quickly forgotten and shelved, if not thrown into the circular file.  A lot of these documents just did not have a whole lot of relevance.  The last one I have participated in, frankly, was for Baghdad.  I served in Baghdad and that one was forgotten even before it was finished being drafted.  I mean it was just incredible how little value that would have.</P> <P>So I guess the point I would make here is that as has been said many times by many people over the last day and a half or sort of out of the point of inflection with respect to how we go about doing our aid business, it seems to me that we are at an equal point of inflection about how we organize and manage our chanceries around the world.</P> <P>With particular respect to Nigeria and the laundry list of things that Tom read from his notes in which I have here, too, that need to be done, it seems to me we need to pair that down substantially, get a focus and stick to that focus for a very long period of time - not just one year but for several years.  And the one item that is very clearly premised it appears here it seems to me is the oil.  We cannot afford in this country to lose one-sixth of our oil imports from Nigeria or any other country unless we suffer enormous price rises and shortages and political chaos of all kinds, so we really have to put that at the top of our list.  A lot of these other things about fostering trade and improving relationships with the neighbors and all of that, that is all sort of Boy Scout stuff when you have an issue like oil that you really must focus down on and not make very many mistakes with, it seems to me.</P> <P>We had a similar list of things for Baghdad.  I could use other countries, too, but that one is always on people s minds.  Every constituent element of the U.S. government got a page or two or something in that document and by the time it was finished, it was totally meaningless, totally without hope in terms of being implemented in any reasonable way and that is why it was quickly forgotten.  I could not tell you today what it said because I got tired of reading it; about 45 pages through it, it was so horrible.</P> <P>Well, at any rate, oil is what it is all about.  There are lots of different ways that an embassy can organize itself for dealing with oil issues.  In Baghdad, we had a whole host of advisers that we put in the Ministry of Petroleum.  Some of them knew what they were doing and some of them did not, and the fights between those who did and those who did not know what they were doing were more emblematic of what went on in that ministry than what we were advising them to do or not to do.  It was really quite an amazing spectacle out there.</P> <P>Those are the kinds of things that we really have to stir away from, so I guess what I would suggest, Tom, is that we get some real capabilities, some guys who really know the oil business in there - if they are not already on the staff - and make sure that the political guy, the station chief, the econ councilor, everybody sits down and listens to these guys on an as-needed basis.  You cannot run a chancery in a country as oil important as Nigeria without real expertise on your staff and generally, that will not come from your econ councilor or if you got somebody there from commerce or wherever.  You have to hire it.  You have to go out and find it; it just is not available within the House, if you will.</P> <P>So that is where I would focus.  There are a lot of elements to that but I would say rewrite the strategy, focus it on oil, there will be a security component to that.  We can hear other people who are more militarily oriented than I am to speak to what that might be.  But get rid of all the fluff, there is a lot of fluff in there.</P> <P>Thomas Donnelly:  I wanted to make it a full menu that people can choose from.  I want to toss that both to the panel and everybody focusing on the - actually, the first point you made, Larry, about sort of the difficulty.  Again, let s just stipulate that the new administration has or is at least willing to try the idea that the on-the-ground focus is critical to success.  Now, we have been able to accomplish some of this in Iraq and Afghanistan because these are extraordinary circumstances because we are at war and struggling to respond to that.</P> <P>What would we have to do under more normal circumstances to empower a team like this?  You mentioned sort - and maybe this is a question for Samantha, in particular.  Again, let s just stipulate that we want to try to accomplish this.  What do we have to do to arrange the normal bureaucratic processes so this is not a stillborn experiment?</P> <P>Samantha Ravich:  Well, I think the first thing is to make a case why the country team should have a much greater say in the process.  And I think in the Nigeria case - I do not know a lot about Nigeria but - it seems very apt for this because in kind of the new security environment, we look around the world and see this is a great example.  I mean it is a weak state.  It is seen as a relatively illegitimate government.  I mean now there are a hundred countries that are weak states in the world.  It has a number of non-state actors, armed groups that are playing off this, using the weaknesses of the state.  And it has a very valuable resource that brings in a lot of other interests around the world to focus on it; multinational companies and others.  And then there are global movements that are very interested in what is going on in Nigeria.</P> <P>So it really is a very good example of there are all these different forces at play in Nigeria that only the people on the ground can really get a sense of not only who is good and who is bad but who are the bad actors aligning with both in the country and outside of the country.  And who are those good actors either they fully align with us or not - and I ll get to the Washington question in a second - but who are the people we need to find, to strengthen, to help on the economic and the political side and the other aspects?  And that just cannot be done from Washington.</P> <P>So the first point is the country team has to make a case that it has the people, the knowledge, or it can get or it can develop to actually understand what is happening on the ground and who the people are we need to find, to reach out, to develop and to build alliances with?  So that is the first case.</P> <P>Now, how you protect it from Washington - a couple of things.  So you make the case - that is number one.  Two, I ll put this very quickly on the table because it always comes back to resources.  In some ways - and this may sound counterintuitive at first - you cannot demand too much resources for the country team because if you do, that immediately is like bees to a honey so everyone in the interagency is going to want a glam on to a bigger budget.  So you have to be reasonable when you are thinking about how to play the resource card because any bigger, then all of a sudden, all these other agencies are going to - the alphabet soup will come into the mix.  And then you need the protectors in the process itself.  I ll be quiet so you can go on to the next one and we could back the protectors but you need that.</P> <P>Thomas Donnelly:  Your approach would be -- so again, we are sent out here, so our exercise is not necessarily to describe the perfect and most effective country team but we are all already thinking about what we can get away with and what the bureaucracies, the agencies, the bureaus back in Washington or if we were doing this in real life, will we set out to describe the country team in the perfect abstract to achieve as many of these goals as possible, or is that a bridge too far just from the start?</P> <P>Samantha Ravich:  I think that you want to start out with whether its oil or nothing but, or it is a subset of the issues that you said.</P> <P>Thomas Donnelly:  But what is the priority list?</P> <P>Samantha Ravich:  Well, you do that and then you have to look - it has to be reality based, I mean both budget and personnel because if you happen to get the greatest ag person, that is going to drive something.  The personnel always drive it but you set out what you want to achieve and then you put a cloak of reality on it.  And that is where you will your protectors, too.</P> <P>Thomas Donnelly:  Bob twitching first and then Jamelle.</P> <P>Robert Killebrew:  The role I have been given to play is the commander of the military group or the military assistance group that goes to Nigeria as part of the country team.  And just so we all know, a MAAG or a mil group is not structurally part of the country team but it acts as part of the country team.  And the piece I would like to talk about just for a second is resources.</P> <P>First, Nigeria is a basket case for security we all understand that.  The rebel groups in the South that are threatening to break the country apart, they are menacing the oil supply.  From a DoD prospective, I can make a thousand scenarios that call for the deployment of thousands of American troops.  And it seems to me, one of the problems of the country team will be to assess the security requirements in terms of Nigerian security.  I assume that in this exercise, we are not trying to get into a war in Africa.</P> <P>Thomas Donnelly:  Exactly.  I mean we are here to prevent and not to fight.</P> <P>Robert Killebrew:  That is right.  When you get a military assistance group assigned, we can do a lot for you.  But one thing about military assistance groups also is they are very, very task-oriented people and they stray like greyhounds in the slip to get down there and do their job, and DoD has a huge pile of resources.  So the ambassador is liable to be concerned enough to say, If I cannot get my assistance through normal channels, what can the military give me?   And I would just offer to you that if the bottom line here is to avoid a war in the Nigerian Delta that you would want to be, Mr. Ambassador, very, very careful about the way you manage the level of military assistance in Nigeria.</P> <P>Thomas Donnelly:  Bob, when you get to your formal presentation, I would particularly like you to tell me how to manage the new AFRICOM commander but we will wait until we get -</P> <P>Robert Killebrew:  Promote me to four stars.</P> <P>Thomas Donnelly:  I assume that would be the right answer.  Jamelle, did you have a quick --</P> <P>Jamelle McCampbell:  I had a couple of things.  To go back to putting together the country team, I would certainly -- if you are going to have a more effective country team, I would -coming as I am from the economic development/private sector side, I would absolutely include the private sector in your initial planning stages with the country team, and I would also include - as Bob said - the military component of this.</P> <P>Now, how that is all going to work itself out over time again remains to be seen based upon what national interests we are looking at and also what the Nigerians are willing to accept.  But at the very least, there needs to be an economic blueprint for private sector development developed by this team.</P> <P>Thomas Donnelly:  Right, well, as the [audio glitch], you have - for the duration of Mauro s presentation - to give me some suggestions on how to go about doing it; that is a good idea.  Mauro, why do you not --  </P> <P>Mauro De Lorenzo:  [Audio glitch]</P> <P>Thomas Donnelly:  Yes, it is.</P> <P>Mauro De Lorenzo:  Thinking of the headlines which are going to be appearing in Nigerian newspapers tomorrow, AEI finds thousands of reasons to deploy American troops in Nigeria .</P> <P>Robert Killebrew:  That is what we do.</P> <P>Mauro De Lorenzo:  Every time the colonel and I go speak with the Nigerian defense chiefs, the first they want to talk about is jobs in the country, which is not always what we expect to hear and I guess that is why he started taking me along but they seem very concerned about the levels of joblessness.  Nigeria, of course, if you look at its development statistics, is one of the worst performers in the world.  In fact, one of the main reasons it is very far from qualifying for Millennium Challenge Corporation assistance is that it fails every single indicator in what call investing in people, education, immunization rates, girls education in particular, which is a surprising finding when you realize how much money Nigeria has.</P> <P>Nigeria is not Niger; it is not Laos.  It is a country with substantial resources, and I think that reality has to inform our strategy because I do not think we need to ask for billions of more dollars in direct aid the Nigeria.  We need to figure out why Nigeria cannot use the money it already has to solve some of these problems on its own.  And I think that has two consequences for us and it shows - as the econ officer - the limits of what I m able to do because Nigeria has a government which is not designed for service delivery.  It is designed to keep Nigeria together, and that is why governors of the 40 or 50 provinces each get a sort of automatic share of oil revenues wired to an account every month with no requirement to explain how it was spent, and that keeps things quiet but it also means there is a lot of corruption and people are not benefiting from the money.  But we do not really have authorities or ways to work directly with provincial governments and governors to do things in terms of institutional reforms.</P> <P>The second thing is that Nigeria, in spite of itself, or maybe because of some of these government affairs, has one of the most dynamic private sectors anywhere in Africa.  In fact, if you come out off Heathrow Airport today, you may get into a taxi with an advertisement for a Nigerian bank on the side.  And they are buying up banks across Africa, there is a lot of manufacturing - very vibrant and dynamic.  And the things available to us in the embassy to leverage those activities to use them, for example franchising in health clinics, for example business opportunities in some of these core health and education sectors, we have very little available to do that and every time I call one of the agencies in Washington that supposedly has that as their job, they do not know who I am and they have no way of responding and we have no funds available to ourselves.  There is no one person in charge of our private sector stuff.</P> <P>Thomas Donnelly:  All right.  So how can we tap into government resources either revenue streams or authorities?  How do we use the Millennium Challenge Account or the AGOA authorities?  I mean, we know what tools we have.  How do we employ those tools to achieve some of this?  So, Jamelle first now then Samantha.</P> <P>Jamelle McCampbell:  Well, I will suggest to you that there was a case study that was done and it no longer exists but it was during the golden hour of Afghanistan s possible economic development.  It was called the Afghanistan Reconstruction Group and it was private sector people who were recruited into the government for a period of time to go and work at the U.S. embassy in various sectors, be it oil and gas, be it health, be it education.  And I would suggest to you that even more so than working out of the U.S. embassy with the agreement of the Nigerian government that they would be allowed to embed themselves to more or less a degree in the ministries and act as mentoring in all areas of private sector development so that you can bring that kind of robust private sector more organized in a systematic way than we have in this country to what is there at the moment.</P> <P>Thomas Donnelly:  I am reluctant to introduce the Nigerians to the joys of securitized derivatives and other modern Western financial instruments but we certainly have a lot of unemployed financial services officer so we could do this without spending a lot of money, without developing a program just simply by promoting and by focusing our efforts on helping the Nigerians [audio glitch] their financial sector.  Correct?</P> <P>Male Voice:  Well, actually they can help us develop our financial sector because no Nigerian bank failed as a result of the financial crisis which is interesting.</P> <P>Thomas Donnelly:  Okay.  It is a part --  </P> <P>Male Voice:  [Cross-talking] It helped me understand Washington and why --</P> <P>Thomas Donnelly:  Yeah.</P> <P>Samantha Ravich:  The problem in Washington is there really is no single person, no single place that can bring together the multiple of streams within the U.S. government that have pieces of this puzzle and they are incredibly diverse.  I mean not only is there the economic bureaus at state that have a piece of this - obviously, USAID has a big piece of this - but Ex-Im, OPIC, Treasury through terrorist financing has a piece of this aid - they say they do - obviously, the military SERP funding.</P> <P>It is across all the various agencies and, you know, when I heard your plea and asked any interagency and said, Okay, but who brings all this together?   You know, because I had thought I did not know so I thought, Oh, well, maybe Commerce.   So I go to Commerce and they say, No, no, no, the foreign commercial service is only about U.S. exports.  We do not really care about promoting development in that country.  It is just about exports.   And I said, Well, who is in charge?   And everyone goes like this and then USAID says, We are in charge.   And everyone says, Oh, what we all agree on is USAID should not be in charge.   That is it.</P> <P>So in answer to your plea, you do need a protector if you want to bring together the strains of this.  I mean I think that a person in the White House does need to say, This is one of the most important aspects of our foreign policy and how to stabilize countries is the economic development, and using American expertise in one of the things that we do best: Entrepreneurialism, promoting markets but there is not anyone to oversee this process.   You need to find your protector because, otherwise, everyone will be grabbing at bits and pieces and it will break down.</P> <P>Thomas Donnelly:  [Cross-talking] It seems to me, as an ambassador, too, I want a person or two who really knows this - where the money is hidden and what revenue streams and what streams of expertise I can tap back in Washington - somebody who can give me good transparency on what these various agencies can provide to me in the country.</P> <P>Samantha Ravich:  And I would say it has to -- I mean because I came from the White House, I see it from a White House centric but because there are pots of money in so many different areas, to be able to put a package together, I think it almost has to at least have a point person in the White House because, otherwise, the person from state will say, Yes, but DoD has so much more money than we do.  We do not want to pay, let them pay.   And OPIC will be raising their hand, Anyone notice us?   And it will really break down very, very quickly.  So you need a protector over the process and you need someone who can bang heads and frankly probably should reside in the White House not distributing the money but knowing where the pools are and forcing consensus on it.</P> <P>Thomas Donnelly:  Let s go to you guys at the moment.  What contributions can you make to our struggle here so far?  I guess we will just do a handful but we will start with this gentleman and then that gentleman and then we will turn it [inaudible] okay.</P> <P>Male Voice:  [Speaks away from microphone] I m very struck by the fact that [audio glitch] virtually all the discussion is about process and how to involve this agency back to Washington or that agency [audio glitch] on the actual strategy of the [audio glitch].  The other thing I m struck by is that there was zero mention of the [audio glitch] International Monetary Fund or the World Bank [audio glitch].</P> <P>Thomas Donnelly:  Well, we should kind of go back to everybody on the two points you made.  Okay, so let s just focus on this question of helping Nigerian financial systems develop.</P> <P>First of all, so what in particular should we be trying to accomplish on that front?  And it is difficult enough to sort of get the various American bureaucracies pointing in the same direction.  Maybe we could come back to that later and Paul might want to address --</P> <P>Paul Wolfowitz:  [Cross-talking] and I would say it is right.  I mean the expertise is there but I mean, in a U.S. country team, IMF does not want to become part of an American country team --</P> <P>Thomas Donnelly:  [Cross-talking] Again, the idea is to --</P> <P>Paul Wolfowitz:  -- which is trying to achieve things for American purposes you say.</P> <P>Thomas Donnelly:  -- meld these things together in a way that does --</P> <P>Paul Wolfowitz:  -- which is not to say that --</P> <P>Thomas Donnelly:  -- advance the American interest.</P> <P>Male Voice:  Can I say something about that, Tom?</P> <P>Thomas Donnelly:  Yes, sure.</P> <P>Male Voice:  Some years ago, when the Saudi Arabian government was struggling to get its sort of technical and political act together with respect to their vast oil resources, they paid for and we provided a group of advisers and technicians for a number of years.  They served under the general tutelage of the chancery out there but they were day-to-day workhorses for the Saudi Arabian government.</P> <P>There may be people here who know a lot more about this than I do but I know that much and not very much more.  It seems to me that with the resources, the financial resources available to Lagos, to the government there, that they would certainly be capable - I m not sure they would be willing - and maybe they have already tried this - I do not know - of bringing some expertise and paying for it but having it under the general tutelage of a single country which has their best interest at heart as well as our own, of course, and try something like that.</P> <P>I think, in general, countries that are as corrupt and decaying as the government in Nigeria is that they loathe to take advice from the IMF and the World Bank and other such organizations because they are afraid you will find out how they are stealing what they installed [sounds like] and that is always the big issue there.</P> <P>Thomas Donnelly:  I m going to be a little bit ruthless about making sure that we move forward so we have that gentleman and Tony.  Let s take two at once, okay?  Let s just proceed and the microphones will be what they are.  Just go ahead, shout it out, or try the other one.</P> <P>Male Voice:  I m a little surprised at the bilateral concept.  It seems to me quite possibly unrealistic.  Let me propose one input that it seems to me you might well consider.  China has proposed a barter agreement with Nigeria worth $20 billion.  It needs petroleum concessions in exchange.  There are forces in Nigeria that want to use this offer in order to renegotiate the oil drilling concessions with Western - with U.S. - oil companies.</P> <P>There is an additional problem.  The most corrupt ministers and governors are dead set against this because the barter agreement prevents the flow of money which means they cannot get their cut.  The more honest and progressive elements in Nigerian politics are in favor of this because for once, the money will not flow to banks abroad but will result in development.  What is your country team going to do about this scenario?</P> <P>Thomas Donnelly:  It is an excellent question.  Two things that occurred to me: I mean you sort of raised the larger question of whether there is or can be a commonality of strategic purpose in Africa between the United States and China which is an open question, at least.  So one thing, I want to know what I m getting into.  As you described it, it sounds actually like a very promising approach.  I just want to know whether there is another shoe out there that I do not know about so again, knowing and getting some strategic guidance about how we are to think about China and Africa is probably a prior question and then understanding the details, but it sounds like something to think about.</P> <P>Male Voice:  I think you are leaving out an important element here and that is the Hill.  The Hill is particularly through the good offices at [indiscernible] and I have no reasons to doubt Russell s [phonetic] intentions here but Nigeria has been prevented from receiving assistance and sure enough its policing [sounds like].  One of the problems, of course, with the Delta is they do not have adequate resources for surveillance.  They do not have an adequate groundwater navy to serve, to supervise and police the riverine areas of the Delta.  They do not have the opportunity to train local policing because Nigerian police are known to stop and shoot and go.  They is a national cadre of police and they operate like a SWAT team.  They do not go in and conduct training for local policing and there is no connection between local policing and enforcement and training - they are viewed as outsiders.</P> <P>And then, on the other hand, because of the security situation is precarious as it is in the Delta, we cannot get development resources into the Delta to try to create some sort of sense that things are getting better because there is a sense of despair within the Delta that has been built up for 25 years.  And so I think we need to have an engagement in the Hill and just, Samantha, the last thing I m going to give you - in the last 19 years that I have observed very closely on U.S. administration policies toward Nigeria, we have not had effective cover or knowledge in the White House on Nigeria.  We had it sporadically and we have an [indiscernible] assistant secretary level and we do not reward or recruit people in the staffing level within Nigeria and Abuja.  We can give them the appropriate resources, support and training to make it worth their while in their career development to be in Nigeria.</P> <P>And I can say this for someone who has viewed this, it is not easy.  It was an ambassador and you maybe know a long time ago - and we have had Tom Pickering, we have had some distinguished people there but we have not developed a reward and recruitment system for our staff.</P> <P>Thomas Donnelly:  Do we need legislative relief now to go forward to -- I mean as a point of departure, do you think?</P> <P>Male Voice:  I believe our goal was to hold on the legislation and foreign appropriations.  I obviously would not want to do that.</P> <P>Thomas Donnelly:  Okay.</P> <P>Male Voice:  I would like to hear more from Bob Killebrew on this subject but it seems to me we are onto something that is very important here on a number of dimensions.</P> <P>Robert Killebrew:  [Cross-talking] A short history lesson for all of you in the audience here.  Before the tsunami that became -- Vietnam happened.  U.S. country teams and U.S. military advisors and U.S. military security assistants had a considerable more latitude to operate in the countries in which they operate - in 60-plus countries - than we do today where we have very small detachments in 30-some countries.</P> <P>So the whole issue of security assistance, I absolutely agree with police and the paramilitary forces, is a post-Vietnam phenomenon that has not yet been corrected.  It is kind of interesting because we are coming into another historical period now where we know we need it but finding the legislative center of gravity that can start and go back doing this is important.  We have some legislation that was passed in the face of obvious need in Afghanistan and Iraq; it is renewed year by year.  And because it is renewed year by year, we cannot build sustained policing programs.  And the problems of security in the developing world are not armies - they are cops.  Police and paramilitary forces that the U.S. military has forbidden from training except for a year-by-year extension and there is no other organ of government that can do it very well.  I m not sure we can do it very well but we could get better.</P> <P>So the issue of security in developing countries like Nigeria - Nigeria is kind of your nightmare case because they are slowly coming apart at the seams - starts with, in my view, a reorganization of the post-Vietnam legislation with appropriate congressional oversight so that we do not go wild as we did in Vietnam.  That permits the ambassador of the country team to have a meaningful say in the kind of security assistance that comes into his country.  Right now, he has no say at all.  It is passed by Congress and he simply is a pass-through as it comes into the country.  We need to reorganize the legislation.</P> <P>We also need - and this is a kind of a mushy thing since that word has been used today - to reorient the management of policies toward countries like Nigeria to provide more authority for the ambassador on the scene, to reorganize or reorient some percentage of all the assistants from all the agencies in his country.  If we believe that the ambassador is the person that represents the U.S. government and best qualified to make these decisions then he or she should be staffed with the appropriate staff and the appropriate legislation and authorities so that they can manage that kind of assistance.</P> <P>I was listening to the conversation this morning and realized how much of a fish out of water I am because military guys do not normally figure in development assistance, which was the subject this morning - wonderful.  But one of the things that we can do as function as part of the country team is help the country under the tutelage of the ambassador and under the country s own dynamics start to rebuild this basic security apparatus.  We cannot do that today - we just cannot.  We can do it in Afghanistan and Iraq on an episodic basis but what we are talking about in the case of Nigeria is a decades-long project to have any hope of success.</P> <P>Paul Wolfowitz:  I just want to emphasize I think this is important.  I would say two reasons.  First of all, that security is so critical to development and what has already been said by Colonel Killebrew and other people, it is hard to have development when you do not have security and in fact, there is a danger in Nigeria, they do not even have a country in which case, forget about oil and a whole lot of other American interests.  But I would say there are two other dimensions of this that are important.</P> <P>One is that, as has been mentioned - you mentioned it earlier on - there is a crying need for effective peacekeeping forces in Africa, and Nigeria is one of the countries that could provide them.  I think there is a debate that one ought to have as to whether you want to go down the road of improving the capability of the Nigerian military.  I would think I would argue in favor of it but it is not a simple yes or no.</P> <P>But the other dimension - which maybe it should not be a surprise - there is a wall thicker than the Great Wall of China between the development community and the security community and it goes both ways.  It is a reluctance to recognize sometimes that if you want to have development, you need to get messed up in these ugly security issues but it is the other way around as well.  Sometimes, especially under difficult conditions like the Niger Delta or Iraq and Afghanistan or, for that matter, Liberia where you have peace but where you have no competent authorities, the only people that can actually get a development program going that have that organization are the military.</P> <P>And a real world example was in Liberia after the election of President Johnson-Sirleaf and there was effectively no Liberian government but there was a lot of money so the question is how do you get roads built?  And I said - when I was at the World Bank - There are 15,000 U.N. peacekeepers there without any war to fight.  Some of them are engineer battalions, why do we not give them some money to build roads?   Oh, no, no, no.  We do not talk to the military.   Well, we broke that down.  We gave the U.N. half a million dollars to, I think, the Bangladesh engineer battalion.  They were so good at building roads that they came back and asked us for, I think, $6 million.</P> <P>The military can be thought of, I think, as an instrument of delivering assistance as well as delivering security and, as has been mentioned already a couple of times, one way to get security is to deliver development and I think I ll stop here.  I mean the huge question of how deeply you get involved with a very corrupt military, the first thing they are going to do with your assistance is steal it and sell it on the black market but it is an absolutely crucial issue especially in a place like Nigeria and especially in a place like the Delta.</P> <P>Thomas Donnelly:  Jamelle, why do you not make your comment and continue on the other presentational parts you may have?</P> <P>Jamelle McCampbell:  Okay, just to follow on what you were talking about and then the uses and example.  Another ongoing example which we have in Afghanistan which are the provincial reconstruction teams, which might be something to be thought of as a possibility in Nigeria and, of course, these are the groups of people that is militarily-led.  They could necessarily be civilian-led.  It would depend upon the nature of the region where they would be occupying or they would be stationed.  But out of these PRTs come your expertise also in agriculture development, in private sector opportunities, in looking at opportunities for mineral development, oil and gas exploration, not just your diplomatic and your military people but an enlarged PRT, if you will, to begin to look at what are the possibilities for development.</P> <P>And by the same token, it would provide -- since these are PRTs and if we were to do this, we would also have the capability of having these funds, what we call commander s emergency funds, we would have the ability to do basic reconstruction projects so that might be something that might work very well in Nigeria.  I know we are talking about phasing them out or transitioning them in other parts where we do have them but I think it is a concept that certainly requires some thought and possibly implementation in this particular situation, an enlargement of that, a larger civilian component perhaps.  And those necessarily do provide regional security also if necessary.  So, my comment.</P> <P>Paul Wolfowitz:  Well, I just want to say I think it is a concept that is definitely worth thinking about but it is also [audio glitch] remember in Nigeria and in most of the countries we were talking about, it cannot have a U.S. flag on it or it is dead and that is where you come in.  I mean someone talked about the IMF and the World Bank.</P> <P>In the security area, we have to look at the U.N. and it is uncomfortable when it legitimately gets about working through the U.N.  I think it is either through Nigerians or through the U.N. but I believe one of the problems of the AFRICOM is we put too much of an American label on something that could be our real strong suit because we are -- one place where no one can compete with us is in military assistance and military training, but when it begins to look as though it is the U.S. acting militarily in our security interest then we have a problem.</P> <P>Thomas Donnelly:  Paul, I wanted to sort of go back to you on that - on your last comment.  Fully recognizing the challenges and the downsides of engaging with the Nigerian military, it does really remind me very much of the Indonesian case example.  It is like the only thing worse than getting in bed with them is sort of letting them get off the leash by themselves.  Again, hardly being a Nigerian expert but wondering whether that is not going to be a sufficient step in terms of, again, both creating a more effective military that can do the operational things that would be a contribution but, again, ensuring that it does not go back into domestic politics, that it does not go into business for itself, and things like that.  Whether an apropos of the previous conversation about legislative, making sure that they are not legislative restrictions that are penny-wise and pound- foolish, whether there is a case to be made here that this is going to be a problematic institution but we must try to make it the best that we can do, which sounds like I m with the above.  Obviously likened to --</P> <P>Robert Killebrew:  One of the things that we have not studied - and I would use the Nigerian case study to talk about it - is the way in which you would weigh a country team so that the people on the country team had the horsepower they required to do this very delicate assistance to a country that is falling apart and build institutions over time, I ll use the military example because it is what I know best.</P> <P>Assuming we do not want to get into a war in Africa and assuming we want to keep the Nigerian face on everything we do - which I think we do - then the commander of your military assistance group had better not be a colonel who just gets swallowed in the UCOM or in the AFRICOM staff.  He needs to be a two- or three-star who can pick up the phone and call the commander of AFRICOM that this is an important problem for the United States.  And likewise, the ambassador should be someone with a horsepower of a Holbrook who can pick up the phone and call the White House if he is not getting the support he needs.</P> <P>One of the reasons why - in my reading of history - that country teams lose track is because if there is a serious problem, the horsepower in the embassy is usually too low to get to the kind of focused attention it needs in the U.S. government.  And in the case of the military problem that we would have here with security assistance, you would want the military group commander and the AFRICOM commander to be exactly in lockstep on the kinds of assistance that goes in and the timely things that happen in that country.  I assume the ambassador [audio glitch] in the same position.</P> <P>Thomas Donnelly:  Intervention.  Who really has the final call on that?  You could imagine that the regional commander has some high-speed exercises that he wants to do that would not necessarily be -- he is looking at it especially through an American lens.  In that final negotiation, who should get the final call as to shaping the nature not only the engagement of the country but the way the rest of the DoD with the Nigerian [audio glitch] --</P> <P>Robert Killebrew:  Well, in my view, clearly the ambassador should unless -- the balance between military assistance and civilian supervision has long been difficult.  John F. Kennedy grappled with it when he was president, and the line he drew then is still, in my view, the right line.  As long as it is a military assistance program, it works directly for the ambassador, and the regional commander kind of sits on the sidelines and enables it to happen.  When substantial forces are deployed, the balance shifts somewhere.  We have never worked that out and we do not quite understand it today, obviously.</P> <P>But the whole construct, the country team idea of a country that is falling apart, and all military counterinsurgency doctrine which we never execute says that the political diplomatic head has to lead U.S. intervention in the country and the military provides a supporting role.  In the Nigeria case, I think that is exactly what we are talking about here, and I might add it should apply also to development aid in every other agency of the U.S. government.</P> <P>Male Voice:  [Speaks without a microphone]</P> <P>Male Voice:  Yes.  I have always been impressed by how DoD can task itself or be asked to do something, and that tasking does not go to just one organizational unit.  Depending upon what needs to be done, a number of detachments might be glued together.  I guess this is under Goldwater-Nichols.  I m not quite sure how all that -- you guys can deal with that, I do not know.  At any rate, that is what happens and they get the best people and the best units to go out and do what needs to be done.</P> <P>In my experience, when I have looked at ambassadors in various countries where I have traveled or where I have served, I have often felt sorry for them because I have seen it with my own eyes and experienced cases where the FBI would have an office and they would not keep the ambassador informed of what they were doing.  I was in a post once - this one was Haiti - and the ambassador tried very hard to regulate the kind of weapons that the DEA carried on their persons everyday and they basically told them to go to hell and stop asking about it because they were not going to pay any attention to it and they got away with it.</P> <P>There are many other examples like that.  These are small examples but ambassadors often do not have the clout they need to control or guide or supervise or influence the staffs that come from non-state agencies to their chancery.  They just do not.  Now sometimes, there is a special relationship - a friendship where they play tennis or whatever it may be - and they work these things out, and that does happen a great deal.  But certainly, there is a lot of back-channeling and stuff that goes on by the various agencies outside of the chancery that the ambassador with DCM, the political counselor, et cetera just never know about.</P> <P>Paul Wolfowitz:  And that includes USAID [cross-talking] and my experience in Indonesia was the worst offender after the [audio glitch].</P> <P>Thomas Donnelly:  Well, let s make it a [audio glitch] agency in that case.</P> <P>Jamelle McCampbell:  Yes, well, I mean one of the problems - and I do not know where this problem starts - is that at least from the perspective here in Washington, the embassy does not always show their worth to the players back in Washington.  They do not, on a consistent basis, make themselves the obvious experts of who are the people on the ground that we need to know.  What are the trends that are happening on the ground?  And the embassy should be positioned to do that for the long-term presence.</P> <P>Now, I m not saying where the problem starts are officious because clearly on the Washington side, we do not place enough importance on that long-term knowledge of a place and we just do not and it is easy to say, Okay, there is a problem.  Send in the military.  We will clean it up and then we will go home.   But that long-term knowledge, that long-term presence - and in this changing world I think we are going to need much, much more - has to come from the people on the ground that are understanding the situation.  And I think the PRT example is actually a really interesting one because that does get to a long-term presence that gets to the economic development and all the other aspects but today, it has not been valued that much by the Washington community and it has not been -- the people in the embassies do not often step up to the plate to show they have the wherewithal.</P> <P>Thomas Donnelly:  If I could go back to that, again, we have been able to do PRTs and actually get better at them, again, within the context of a crisis or a wartime environment.  What would it take -- can you just even imagine proposing doing something like this, say, in the Delta, for crying out loud?  I think the first response would be, Oh my god, people are going to get killed, captured or taken hostage. </P> <P>Paul Wolfowitz:  Not with American forces.  I mean that is --</P> <P>Thomas Donnelly:  So you would still --</P> <P>Paul Wolfowitz:  [Cross-talking] You would not go down to Nigeria but Jamie was just saying the concept adapted in a different place.</P> <P>Thomas Donnelly:  I see, okay.</P> <P>Paul Wolfowitz:  On the larger issue here, that seems to me that in any given time there is somewhere between five and 10 countries that command major attention in Washington - it varies.  When I was in Indonesia, it was basically [audio glitch] those countries involved with the Soviet Union either in Asia or in Europe plus the perennial Arab-Israeli dimension.  And then you have 120 countries in the world that are important to their own people but are never going to get a lot of attention here.  But Nigeria, like Turkey, like Indonesia and like Pakistan when it was more peaceful, if you like, there are about 10 or 15 countries that really ought to get more attention here even if they do not get more resources, and one of the most valuable resources is high-level attention.  I mean Bob correctly said a two-star who can pick up the phone and call a commander is an incredibly valuable asset and those are easier to come by, by and large, than $100 million aid programs.</P> <P>And it seems to me that one place where technology actually can help - but who knows, I mean if I were sitting in the embassy I might have a different view of this - it is possible through video teleconferencing fortunately or unfortunately to get a lot more engagement from Washington that was typical in the past.  You have seen in Iraq how you can get way too much of it and daily SVTs --  </P> <P>Thomas Donnelly:  Could I just speak to that?</P> <P>Paul Wolfowitz:  Yes, but one second, though.  If I were that ambassador in Nigeria, I would imagine that if I could get a senior leader in Washington at the undersecretary or preferably higher level who once a month - not everyday because I would not want it would hear our issues and let us know whether, for example, if we get involved in this barter deal with the Chinese, are we going to have legal problems with American oil companies?  To get that greater level of attention, it seems to me would be valuable in this sort of middle category of countries.  Iraq is one of those in the top 10 that is getting attention everyday.</P> <P>Male Voice:  In my time out there, everybody on my staff considered SVTS - the video telecom - is going to be the worst daily evil that we had to face.  And the reason for that was that three or four of us would sit there in front of the camera and back in Washington, there would be countless people in these huge conference rooms over at DoD or at state and sometimes they would be jointly held and they would pepper us with all kinds of questions and we did not even know who these people were half of the time, and we were expected to respond and be ready and to know everything and it was nearly impossible.</P> <P>I think where SVTS are useful is where there are just one or two people discussing one issue that is known in advance.  Hopefully, there is a staff paper that both ends of the SVTS have read in advance and prepared their thoughts on and then it tends to work pretty well.  I like them when that happened but when it was a free-for-all, no.  The 8,000-mile long screwdriver was what we referred to it as and we hated it.  We really, really hated it.</P> <P>Thomas Donnelly:  Possibly, we could solve both problems by transferring some of the flat screens from Baghdad to Nigeria.</P> <P>Jamie, real quick, we are getting close on time.  I want to save a couple of minutes for Bob to further sketch out aspects of the mil-to-mil engagement, and I want to save five minutes for some audience comments and five minutes or so for Paul to wrap up so that is where we are.</P> <P>Jamelle McCampbell:  Just a couple of points.  As it has been discussed about having a high-level military czar, as it were, I mean I hate to use that word because there are so many negative connotations to it.  In this case, I would like to see an economic czar, someone with appropriate gravitas to be able to move things and coordinate things.  We have seen a great disaster in Afghanistan by our choices of someone whom we thought - some of us did not think it would work out and we know now from lessons learned from that how important it is because we have thousands of projects being duplicated and money being thrown needlessly and inefficiently.</P> <P>The second is just a quick comment which is I have an office post at the U.S.-EU and at U.S. Mission to NATO and heaven forbid that they should speak to each other.</P> <P>Thomas Donnelly:  Actually, it is probably better that they do not but that is -- Bob, I just want to make sure that you were able to describe your mil group in as much loving detail as you are able within the space of two and a half minutes.</P> <P>Robert Killebrew:  I have to say I feel a little humbled about this because the longer we go into this scenario, it occurs to me that economic development and the things we talked about this morning are probably more important than the military side.  But having said that, the mil group that we would put in this country, remember, exists in a framework of four key relationships: Relationship number one is the commander s relationship with the ambassador with whom he works and for whom he works.  The other is the regional combatant commander who is actually the mil group commander s boss and writes his efficiency report.  And the mil group commander - I know from bitter experience - spends a lot of time running around trying to make sure the two of them are getting along because the ambassador can order him out of the country and all the regional commander can do is kill his career.  The other relationship that is so very important and this is the one thing I would leave with you on the military side is relationship with the host country military - the mil-to-mil relationship.</P> <P>The U.S. army maintains mil-to-mil relationships with 80-some armies around the world on a regular continuing basis and I m assuming Nigeria would have been one.  What happens to the military relationship though is when a country - and I believe Nigeria has - contravenes one of the various laws that Congress has passed about clean operations.  We cut them off from all military assistance.  When we do that, the mil group goes away.  You get one colonel in the embassy who is kind of a spy and generations of officers in that host-country army, many of whom are going to be leaders in their society, many of whom are involved in economic development, many of whom are running businesses on the side, were totally chopped out of any contact with the U.S. military.</P> <P>I have seen this happen in many cases.  Pakistan is a perfect example and you get several generations of - do not think of them as military officers - leaders of the nation who grew up without any substantive U.S. contact.  And I would offer to you that is part of the legislative fix we have to go back and do.</P> <P>And the last point I would make is - I promised a Special Forces friend of mine I would say this - in all cases and Nigeria in this case in particular, the Nigerian face has to be the one that shows, not the U.S. military face.  Now I would go so far if I were the mil group commander to probably put my people in civilian clothes under some circumstances to ensure that the people of Nigeria and the Nigerian Armed Forces see it is their army, their business and they have to carry the load for it even though they are corrupt - and I have worked with corrupt host nation officers.</P> <P>Kipling had a great line in a poem where he said, Steal in measure.  There is measure in all things made.   And one of the things that you are going to have to do as you go out on the country team regardless of your job is to learn just to put up with the appropriate level of corruption in the country, and it is unfortunate but that goes on.</P> <P>Thomas Donnelly:  Well, the good thoughts before we adjourn the meeting.  I ll try to get everybody if everybody is quick and we will start on that side of the room because you are standing up first and we will work our way across the left and I ll be sure to get you because you were there earlier.  Please be brief.</P> <P>Male Voice:  I m the senior enlisted advisor for the director of the Interagency and Special Operation.  My task as the director in these various instances [audio glitch] and ensuring that the country [audio glitch] advice or whatever knows the range of [audio glitch] that are available to him.</P> <P>We were doing this for the last two years.  We have become a little bit more proficient and we have gained a little bit more support legs with CentCom there in MacDill and also at Washington D.C. and with the video, we can definitely kill you on one end.  We can take for example Ambassador Crocker s and General Petraeus SVTS which basically has 35 outstations and you can influence policy directly from there and get rid of some of the impediments as you are kind of staging your policies and programs in time and space.</P> <P>So while we are bad at some things, we are getting really better at integrating interagency activities.  And unfortunately, we need to take that model and it will not be as positive as we go into Nigeria but it is there and it is available.  And like some of the earlier tendencies, it is learning those best practices and creating a communication strategy so everybody in D.C. and everybody over there understands there are some new ideologies and mechanisms for this.</P> <P>Thomas Donnelly:  I have three, so yes, let s go here.  We will just roll one to the others, okay?</P> <P>William Guyster:  My name is Will Guyster and I m from Good Morning Africa.  I just wanted to say this morning, I actually received a phone call from the Niger Delta - right there - from a government minister actually, and they are calling us about a future trip because they do want to create jobs.  It is kind of their number one priority.  And the two points that I kind of want to highlight with that is that: a) the U.S. government has a lot of natural partners in the area who might be NPOs, who might be enterprises or whatnot and sometimes, you do not know what sort of information we have or what sort of pull we have in terms of -- they are calling us at my house; not at the office - at my house.  Before I came to this conference, I received a phone call at 7:30 this morning and so you have to really kind of understand your natural partners and figure out their incentive structures because in this case it really is jobs more than anything else.</P> <P>The other point that I wanted to make is to check out your assumptions on intel [sounds like] because I wanted to point out that the Muslim North is not as radical as some people might seem to think and that secessionist South, which is very devoutly Christian where all the oil is, is so much kind of more.  So the intel is really important to get that piece right, and working with the governors sometimes is better than working with the central government which is very weak.</P> <P>Thomas Donnelly:  I think that actually is a critical point.  There is just a lot of stuff that we do not know I think in many ways because we are not there, so certainly one of the advantages of pushing out a PRT-like thing would simply to be present in places that we are not very frequently present in.  Sir and sir --</P> <P>Rod MacAlister:  I m Rod MacAlister with the African Middle Market Fund.  Just two quick cautionary notes on a couple of the roles that have been mooted on czars: If your problems ever get important enough to have a czar appointed, you will experience a giant sucking sound of influence coming out of your embassy.  One of your predecessors has had to contend with ineffective shadow ambassador and nobody in Washington or Abuja ever knew who was on first.  As to a protector, it is great to have a friend in the White House.  By all means, bring that person out to ground truth them into things that are your everyday reality but do not ever take that person to the statehouse because once your head of state or any would-be head of state has the cell phone number of somebody in the White House, you are finished.</P> <P>Thomas Donnelly:  Do you hear that?  I m here just keeping watch.  Actually, again I would say part of the mission statement for this thing is to avoid the czar and to keep the synch at --</P> <P>Male Voice:  [Speaks without a microphone]</P> <P>Thomas Donnelly:  Yes, or we are trying to avoid crises and extraordinary circumstances.  And, finally --</P> <P>Frederick Peterson:  I m Frederick Peterson from the U.S. Freedom Foundation.  First of all, I think your selection of Nigeria was outstanding.  Nigeria is a country that is critical terrain.  It is very large; its population will exceed all of that in Western Europe within the next few years.  It has numerous resources that are essential to the West, to the United States, and to itself and the prosperity of Africa.  It is well poised to become a leader in Africa given the proper tutelage, guidance, security and development.</P> <P>However, one thing I think the panelists missed and that I was waiting to hear is not looking at Nigeria somehow as a discrete part of a larger piece but rather looking at the larger piece, looking at where Nigeria plays in the U.S. strategic policy and that is right now, front and center, global war on terror.  And I think the points made about the military and security are absolutely spot on and it is not necessarily military done or military or security solution with uniform military but paramount must be the security of that country, of the oil in that country and whether it has gone through a mix of uniform and privatization, whether it has gone through an amalgam of development and economic - all of these are essential and yet the primary focus I think right now is for U.S. policy, we cannot lose focus on this.  It did not even come up today - it is the global war on terror.</P> <P>Now I have to say that there are -- we know what is happening in Somalia now as we sit and we do know that Africa is a primary objective for radical Islamists that are well-poised within that country.  They are not a critical mass right now but they are headed toward that.  We have to anticipate it.  We have to respond to it.  Security has to be our primary.  We have to look at the primary objective of U.S. policy not just Nigerian discrete policy, and that is the role that it may play in the President s and the national interests.</P> <P>Thomas Donnelly:  Thanks.  Paul?  What do you reckon?  Is it the case that hard cases make bad policy, or is this illustrative of an approach to a more integrated and more effective approach that the country has been --</P> <P>Paul Wolfowitz:  [Cross-talking] Well, I think it is pretty [audio glitch] but I think one of the things it also illustrates is we really get too U.S.-centric too quickly and it is not because I disagree with the last speaker.</P> <P>In fact, there is a wonderful story.  George Schultz used to have a four-foot globe in his office and when you go off to be an ambassador, he would bring you in for a photograph so you could put it up in your office and pretend you were the secretary s best friend and he would say, Turn the globe to your country.   And he went through about 15 newly admitted ambassadors before Mike Mansfield came in who had been already in Japan for about 25 years - actually it was only eight but it felt like 25 - and Mansfield turned it to the United States.</P> <P>So when I went to Indonesia I was sure to include him because there is no question that there is a problem in embassies of clientitis [sounds like] and seeing things too much from the point of view of the country.  However, I also think that if we want to advance U.S. interests in big countries where our resources are limited, then we really got to think about how we reach out and get other partners and the comment about finding local partners is important.</P> <P>An analogy that I think is helpful to keep in mind is the difference between trying to break down a locked door which is obviously very difficult and violent and usually unsuccessful - at least if the guy behind the door knew how to build locks - versus taking a situation that is relatively finely balanced and putting a finger on one side of the scale.  And when I think about what we did in the Philippines where, in fact, the U.S. had enormous assets to bring to bear but nevertheless if we had not - this is 20 years ago - been able to put our finger on the scale and enable the Philippine people to produce their own transition, our interest in the Philippines probably would have gone down the toilet with Ferdinand Marcos.  So you have to find allies, especially when your assets are limited you need to look for local ones.</P> <P>We have, I think, slid over too quickly the fundamental -- well, let me say, which brings me to a point that I m not going to elaborate on but it is sort of interesting in many ways that we are at the end of a conference on development and we have talked mostly about security.  I was someone who said security is important to development but I would say the most important thing for the United States to keep Nigeria from becoming a failed state and to keep the north from being invaded by Wahhabi preachers who, by the way, are there in large numbers - we ought to go after the southeast on that one if you ask me - is to promote real economic development.  And it is appalling that a country with those sorts of oil resources is throwing $300 billion or $400 billion down the sewer in the last 25 years.  It is not a lack of their money; it is the lack of management.</P> <P>And that means I think that we have to figure out how we can put our finger on the scale to support those people who are trying to promote reform there.  And you cannot be goody two shoes and say, We do not deal with anyone who is at all corrupt, but on the other hand you cannot say, Well, corruption is just a way of life here.   There are people who actually are risking their lives in Nigeria to fight corruption and I think it is one of the things the U.S. should put a priority on; it is to try to help that sort of reform.</P> <P>But then just a final comment, I agree with what you said earlier, there are a lot of other people acting there.  And on many issues the World Bank and the IMF can be very helpful.  One of the problems with the multinationals is they do not like to touch anything that is called political and too often they think the issue of corruption is a political issue.  And they certainly think the issue, for example, of strengthening the Nigerian parliament, which I think would be in the U.S. interest, that is too political.  But on that subject, as a matter of fact, the U.S. today and UK DFID are doing things to help the Nigerian parliament have more oversight of the budget which I think is a constructive thing.</P> <P>So I think one has to look for partners and if you think it is difficult to coordinate within a country team and even more difficult to coordinate that country team with the many players back in Washington, just think about the fact that whoever is in charge of the U.N. mission in whatever country I think has 17 sub-agencies that do not deal with one another and that is just one of the development community actors.  So the coordination problem among the development community is appalling and you can only go so far in fixing it but I do think an active role by an American ambassador in getting other players to play which requires you do not lead by orders, you lead by example.  I think it is something we could not take up here but I think that is, in a place like Nigeria, very important to mention of the job.</P> <P>Thomas Donnelly:  Thanks, Paul.  Thanks, Samantha.  Thanks to everybody.  Thanks also to the audience.  You guys have been at it for a day and a half.  Again, we tried to at least make it entertaining if not entirely enlightening.  Please join me in a round of thanks for the panelists.  I declare the proceedings concluded and you are all free to go.</P> <P>[End of File]</P> <P>[End of Transcript]</P></body></html>