The legalisation of cannabis continues to grow worldwide, as countries realise the lucrative nature of the industry, and what the ‘green rush’ could do for their economies. In Southeast Asia, countries that have traditionally been extremely anti-drugs, following Thailand’s example, are now turning their gaze to the industry and its economic promise.
Consumer sales of CBD products, which are non-psychoactive and originate from hemp, are set to grow to an estimated $2.1 billion USD in 2020. However, as investors and Southeast Asian cannabis startups flock to this burgeoning industry, high levels of competition will likely ensue. There will also be heightened barriers to entry, with the introduction of more medical testing in an already highly regulated industry.
The recent COVID-19 outbreak is also throwing many industries into uncertainty. There’s good news from the US though, where cannabis is legal in many states, as medical marijuana dispensaries are being considered ‘life-sustaining businesses’ throughout the crisis. However, it could prove to be a setback in the cannabis revolution in Southeast Asia, where the medical marijuana industry is in its infancy.
Cannabis in Southeast Asia: historically opposed
Many Southeast Asian countries have historically taken a very dim view on drug use, dealing and trafficking. In the past, Thailand, Vietnam, Indonesia, Malaysia, Singapore and The Philippines have all delivered extremely harsh punishments, including the death penalty, for drug offences. In recent years, some of these countries have introduced reforms that have diminished the penalties somewhat, but several continue to execute drug criminals.
President of the Philippines, Rodrigo Duterte, is famed for his hard line on drugs. He caused outrage in 2018 when he joked about smoking marijuana to help him stay awake. The heavy criticism directed at him due to his brutal war on drugs is allegedly responsible for over 5000 deaths. Days before his ‘joke’, three police officers were dealt lengthy sentences for the unjust killing of a youth wrongfully accused of drug dealing.
The tide is turning with Thailand leading the way
Last year, Thailand became the first Southeast Asian country to legalise cannabis for medical use. However, because of its Narcotic Type 5 classification and because of its newfound availability, drug offences rose. That said, the government is encouraging rice farmers in the country to cultivate the crop and calling on hospitals to champion its usage.
Thailand’s bold move to legalise the drug made way for the release of funds for research and development in cannabis startups. It is foolish to ignore the economics of cannabis production due to their huge benefits for Southeast Asian countries. In fact, the Thai government stated that the study of its potential “should be sped up for the medical industry to create economic opportunity and income for the people.”
Thailand’s legal cannabis market for both medical and recreational use could be worth $661 million USD by 2024, while Asia’s market could reach $5.8 billion USD, according to the Asia Cannabis Report. Unsurprisingly, other Southeast Asian countries are already on track to follow suit. Malaysia, Singapore and even The Philippines are making moves towards legalising medical marijuana.
Crypto investors turn their attention to cannabis
The slow adoption of blockchain is leading some crypto investors to turn their attention to cannabis startups. Southeast Asian governments are not the only parties who see profitability in this young industry, and buying into the ‘green rush’ could be a sound investment.
Innovation is key to cannabis production, and so investors are looking at the surrounding technology, be that lights, sensors, packaging or blockchain tracking technology. If Thailand is to compete with the likes of China and India in the cannabis market and continue to attract investment, cannabis startups need to be innovating and carving out a niche. Whether that niche is developing a native strain or diversifying into other consumables, is yet to be seen.
Challenges for cannabis startups
The global outbreak of COVID-19 has had implications on health guidelines from the medical community. Smoking and vaping, of both tobacco and marijuana, are thought to worsen the outcome for people, including young people, who contract the coronavirus. The impact this may have on the cannabis industry in Southeast Asia is yet to be seen, as we do not know when the pandemic will be under control. It certainly makes a stronger case for startups to diversify into food and other consumables.
Although Southeast Asian countries are likely to start legalising medical marijuana soon, the taboo surrounding the ‘drug’ is still in existence. With such stigma surrounding the drug for decades, it will be challenging to shift this overnight. Additionally, Southeast Asian governments’ unwillingness to legalise the plant for recreational use is undoubtedly confounding public perception.
Campaigners and medical professionals have work to do if they are to convince the Southeast Asian public of the benefits of medical marijuana. If investment continues to grow, and the general population sees an influx of medical marijuana tourists, especially in the COVID-19 recovery period, hearts and minds could change in favour of the cannabis revolution.