Pilot project for the transformation of reindeer husbandry in the Arctic zone of the Russian Federation

. Reindeer husbandry is the main activity of the indigenous peoples of the North, which largely determines the way of life of the local population in the Arctic zone of Russia. For several decades, the industry has been permanently degrading due to technological backwardness. The purpose of the study is to assess the feasibility and effectiveness of transferring reindeer husbandry from traditional grazing technologies to fence keeping technology, as well as organizing the slaughter and processing of reindeer products directly in the places where reindeer are kept. The object of the study was a pilot project implemented by a farmer’s cooperative in the “Omolon Tundra” of the Chukotka Autonomous District. The project consists of several closely interconnected components: the transfer of reindeer husbandry to fence keeping, the introduction of slaughter technologies, primary and deep processing of products. Since the components can be implemented all together within a single project or separately from each other, the study was conducted for three options. Option No. 1 (only switching to fence keeping) does not allow the projected investment and operating costs to be recouped within the project’s estimated period and has an overall negative effect. Option No. 2, which involves not only rearing reindeer, but also primary processing of products, ensures that all costs incurred are covered by the end of the calculation period and even generates a positive net effect. The highest efficiency is achieved when implementing option No. 3, which, in addition to the first two, includes deep processing of reindeer meat. Thus, the effect increases as processing deepens and reindeer herders receive higher added value. The results of the pilot project may become the subject of widespread dissemination in the Arctic zone of Russia.


Introduction
The total number of reindeer in the world is estimated at approximately 2.5 million heads, of which Russia accounts for 1.7 million heads.The trend towards a decrease in the number of livestock is evident all over the world, including in Russia, in particular in the Arctic zone, where 90% of the Russian livestock is kept.The average annual decline in the number of reindeer in the Arctic zone of the Russian Federation over the past five years has amounted to 2.5%.
The main reasons for the depression of the industry are: the reduction in the local population and the corresponding shortage of reindeer herding personnel; changes in natural and climatic conditions, which is especially evident in the Arctic zone; uncontrolled growth in the number of large predators (wolves, bears, wolverines); removal of significant groups of domestic reindeer by wild reindeer; low technological level and financial support of the reindeer husbandry.
The trends in population decline, reduction in economic efficiency, and degradation of the reindeer herding industry that emerged in the late 80s -early 90s of the last century, according to experts, are irreversible unless drastic measures are taken aimed at technological and economic development the reindeer herding industry and the Arctic territories in general.
This study is aimed at the economic assessment of a pilot project for the transfer of reindeer husbandry from traditional grazing technologies in the forest-tundra zone of the Arctic to fence keeping, as well as the creation of capacities for primary and deep processing of reindeer herding products, ensuring waste-free production of products with high added value.The authors believe that if the results of the pilot project are positive, such technologies can be widely distributed in the northern territories of Russia.
The project is planned for implementation in the "Omolon tundra" of the Chukotka Autonomous District.
The project is aimed at creating conditions for the comprehensive sustainable development of the rural economy and infrastructure, as well as improving the quality and standard of living of the local population, primarily the indigenous peoples of the North, in a specific territory.
Thus, it can be stated that the project involves compliance with all the basic principles of ESG, as a result of which the involvement of investors and other stakeholders in a comprehensive solution of environmental, social and economic problems is achieved.The popularity of ESG investing is growing every year [1].Investors and businesses in general are increasingly focused on preserving the environment and achieving social justice and care.The emphasis on the implementation of ESG principles in this project is fully confirmed by the goals and objectives set for it, not only of a social, environmental and economic nature, but also of a technological nature [2].

Goals and objectives
The global goal of the pilot project is to radically change the technological, economic, social and ecological environment of a specific rural area towards its sustainable development, as well as to create the prerequisites for the widespread dissemination of new technologies and production methods in the territories of the Arctic zone of Russia [3,4,5].
The specific goal is to transfer northern reindeer husbandry from traditional grazing technologies, which suppose a nomadic lifestyle for reindeer herders and their families, to fence keeping technology, which supposes a sedentary lifestyle, providing a radical increase in the quality of life of indigenous peoples.
The goals are achieved by fulfilling tasks of a technological, economic, social and environmental nature.
Technological tasks: 1) transfer of nomadic reindeer herding to fence keeping technology with the introduction of a system for monitoring the perimeter of pastures and modern technical means for monitoring the condition of animals and herd grazing; 2) organization of a waste-free system of procurement and primary processing of reindeer herding products; 3) introduction of modern technologies for deep processing of products into finished products with high added value.Economic objectives: 1) increasing the safety of livestock and productivity of animals in fenced conditions; 2) increased income as a result of diversification of production and release of new types of products; 3) increasing the added value of products due to deeper processing; 4) an increase in sales prices of products as a result of an increase in their quality.Social tasks: 1) installation of "smart" houses on pastures for housing reindeer herders with their families, equipped with autonomous systems for energy and water supply, waste treatment, connected to the Internet; 2) the transition of indigenous peoples from a nomadic to a sedentary lifestyle (family joining, children studying in a stationary school at least at the elementary level); 3) increasing the level of education and qualifications of the local population, caused by the introduction of modern technologies, including IT; 4) growth in employment as a result of diversification and development of the rural economy; 5) growth in the average income level of the local population; 6) improving the quality of nutrition.Environmental tasks: 1) reducing the stress of animals during fence keeping, improving veterinary care, ensuring the welfare of animals; 2) reduction of environmental pollution as a result of the transition to waste-free technologies for procurement and processing of products; 3) reducing environmental pollution through the installation of "smart" houses for reindeer herders and their families.

Methods
The study is aimed at an economic assessment of a pilot investment project for the transfer of reindeer husbandry from traditional grazing technologies to fence keeping, as well as the introduction of new technologies for waste-free primary and deep processing of products.To analyze and evaluate investment projects in world practice, the methodologies of the World Bank and UNIDO [6] are usually used, which involve the use of several fundamental tools: comparison of situations "with a project" and "without a project", opportunity cost of capital, time value of money and others.Cash flows of benefits and costs to assess the effectiveness of the project are built for the entire calculation period in its steps, and based on the flows, the indicators NPV (Net Present Value), IRR (Internal Rate of Return), PI (Profitability Index), BCR (Benefit-Cost Ratio) are calculated, allowing a comprehensive assessment of the effectiveness of the project.
The pilot project for the technological transformation of reindeer husbandry has a number of features that require some adaptation of the methodology.In particular, the project consists of several closely interrelated components: the transfer of reindeer husbandry to fence keeping, the introduction of slaughter technologies, primary and deep processing of products.If we consider each component as an independent element of the project, then for each of them it is necessary to build cash flows and calculate the values of performance indicators separately.In this case, when constructing cash flows, it should be borne in mind that the benefits of some participants will act as costs for others, and vice versa.For example, a herder who raises reindeer benefits from selling them to a processor, and a processor who buys reindeer incurs the same costs of purchasing them.
In our case, it is assumed that the only one participant -a cooperative of three reindeer herding farms specially created for this purpose, will implement the project.As a result, the cooperative will receive all the benefits as a result of the sale of the final finished product with high added value, and all the costs of keeping reindeers, their slaughter, primary and deep processing will also be borne by the cooperative.
However, since the project components are separable from each other and can be partially implemented independently or sequentially over time, several options for project layout are possible.In particular, the first component of introducing a new technology for keeping reindeers can be implemented independently, that is, without the subsequent organization of slaughter and processing of products.Then the investment costs for this subproject will be the costs of forming a livestock, creating a pasture with a "smart fence" and the living conditions necessary for reindeer herders.Operational expenses will include costs for keeping animals (feeding, veterinary services, sanitation, etc.).As a benefit, reindeer herders will receive proceeds from the sale of the primary processed products, but not from the sale of the live reindeers to existing slaughterhouses.
If we combine the first component with the second, that is, add slaughter and primary processing of products to the first component, then investment costs for the slaughterhouse and primary processing workshop will be added, and corresponding costs will be added to operational costs (slaughter, cutting up carcasses and selling their parts and by-products wholesale buyers).In this case, the benefits will not come from the proceeds from the sale of live reindeers, but from the products of their primary processing.
And finally, the third option involves the implementation of all components in a single project, which also includes deep processing technology.Here investments are added for the construction and equipment of a deep processing workshop, operational costs for the production of finished products, and revenue will be generated exclusively through the sale of final products with high added value.
It is known that up to 90% of reindeer herders' costs are currently compensated through various forms of government support.In the calculations below, these measures are not taken into account both in the "without project" situation and in the "with project" situation.This is done intentionally to ensure that both situations have a common basis and are comparable.We are interested in the effectiveness of the project itself, and the effect is determined by the difference between situations.

Results and discussion
Before constructing the cash flows of each of the options discussed above and assessing their effectiveness, it is necessary to predict the situation "without a project", since, according to the methodology for analyzing investment projects, the result of the assessment of the project itself largely depends on the quality of the forecast.
The situation "without a project" is planned based on the current number of reindeers the cooperative has (91 in total, including 50 females of reproductive age) and the natural reproduction capabilities of the herd, as well as the possible sale of animals for slaughter.Since the "without a project" situation does not involve the purchase of breeding animals due to the cooperative's lack of funds for investment, the cash flows of benefits do not cover the flows of costs throughout the entire calculation period (Table 1).This leads to a worsening of the financial situation of the cooperative, which reflects the general trend of ongoing degradation of the industry.Cumulated discounted net benefits for the calculation period will amount to -29.8 million rubles.The "with a project" situation involves the construction of a 180 km long fence around a territory with a total area of about 100 thousand hectares, consisting of four sectors, which are put into operation in turn over four years of construction with a phased placement of the growing livestock.The growth of the livestock is ensured through the reproduction of the existing herd and the additional stage-by-stage purchase of replacement livestock from outside.
Investments include the construction of a fence, placement of telecommunications equipment in the loop (including telemetric collars for reindeer), installation work on installing antennas, software development, purchase of transport equipment (snowmobiles and ATVs) and breeding animals (Table 2).
Operational costs, compared to the situation "without a project," change due to the transition to a new grazing technology and the need to feed animals kept in the fence.Revenue from the sale of reindeer becomes significantly higher due to the increase in the number of livestock, but it is delayed and begins in the fifth year of the project due to the need to increase the livestock during the first 4 years.Despite the growth in revenue, it is not enough to cover operational and investment costs within the calculation period.
A comparative analysis of situations "with a project" and "without a project" indicates its ineffectiveness and financial insolvency.Net present value of project option 1, calculated as the difference between the total discounted net benefits in the "with a project" situation in Adding slaughter technology and primary processing of products to the first component significantly changes the cash flows of the project.In particular, it is necessary to build a mini-plant for slaughter and a workshop for cutting up carcasses, taking into account their delivery and installation at the project site (Table 3).Operational costs for slaughter and cutting are added.And cash inflows are transformed from proceeds from the sale of live reindeer into proceeds from the sale of the results of cutting carcasses (neck cut, shoulder cut, back rib cut, lumbar cut, hip cut, shank), as well as offal (tongue, heart , liver, head, blood) and by-products (hides, horns).
The calculation results indicate that the second version of the project, which involves not only rearing reindeer, but also primary processing of products, ensures coverage of all costs incurred by the end of the calculation period (see "Cumulative net benefits" in the 11th year of the project, Table 3) and even generates a positive effect of RUB 40.2 million.At the same time, the total discounted cash flow of the project remains negative (-23.7 million rubles).However, the same flow in comparison with the situation "without a project" already has a positive effect (NPV = 6.1 million rubles).Finally, the third option involves the construction of a workshop for deep processing of reindeer meat and the production and sale of finished products with high added value to the final consumer.In this case, the sale of cuts (the results of cutting carcasses) is replaced by the sale of highly processed products (raw smoked sausages, semi-finished products, hams, dried and chilled meat products).Construction of a workshop requires corresponding additional investment costs, deep processing requires an increase in operational costs, but the benefits increase significantly due to high prices for finished products (Table 4).Deep processing of products ensures not only the coverage of all capital and operational costs incurred by the end of the calculation period (see "Cumulative net benefits" in the 11th year of the project, Table 4) and provides an effect of 261.8 million rubles in nominal terms, but also the positive total discounted cash flow of the project (+126.1 million rubles).At the same time, the NPV of the project increases to 155.9 million rubles.

Conclusions
The results of the study indicate that, despite the negative trends in the reindeer husbandry industry that have developed over the past decades, it has significant potential for development.But for reaching its maximum, a radical transition from traditional extensive grazing technologies to new innovative closed-cycle technologies is required -fencing, animal slaughter, product processing, production and sale of finished products with high added value.Such a transformation requires significant capital investments, which reindeer herders cannot afford without external support.The state traditionally helps reindeer herders materially and financially.However, this assistance only allows to slow down the degradation of the industry and does not provide impetus for progressive development.If government

Table 1 .
Cash flows in the situation "without a project", thousand rubles

Table 2 .
Cash flows in the situation "with a project" (option 1 -fence), thousand rubles.

Table 3 .
Cash flows in the situation "with a project" (option 2 -fence + slaughter), thousand rubles

Table 4 .
Cash flows in the situation "with the project" (option 3 -fence + slaughter + deep processing), thousand rubles.