FEATURES OF ASSESSING INVESTMENT PROJECTS IN THE ARCTIC AGRICULTURAL SECTOR

The uniqueness of the Arctic, due to the extreme climate, permafrost, vast territories, poorly developed transport, energy, information, communication, and social infrastructure, low population density imposes a number of restrictions on the regional agricultural sector development and determines specific features of preparing and adopting investment decisions. First, these features concern the main agriculture branch — reindeer herding. The main feature is associated with the traditional substantial state support for the industry, aimed at almost full compensation of current and investment costs of reindeer herding farms, which indicates that they do not have their own financial resources for development. The lack of capital excludes the availability of alternative areas of its use, that is, there is no opportunity cost of capital for reindeer herders, and the discount rate used to calculate the cash flows and project performance indicators is zero. Another feature is that when evaluating a significant part of investment projects in the northern territories, the “Without project” situation is not taken into account. This is due to the large availability of free land for the project activities and the absence of free material and technical resources or the rigid constrain of available limited resources in existing industries. In other words, the resources allocated for the implementation of projects are either completely free from alternative use, or must be purchased anew. The feasible project of creating a kennel for breeding and training reindeer herding huskies in the Chukotka Autonomous Area illustrates the above and some other features. The project implementation will contribute to solving one of the key problems of northern reindeer herding — improving the herd safety by replacing mongrel herding dogs with specially trained reindeer herding huskies with high genetic qualities.

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