Asia’s attitude to medical cannabis and the possibilities opened up by hemp is changing, and it’s changing fast. Today we’re looking at the Asian Cannabis market as a whole, before drilling down into individual countries as this series continues.

By Henri Sant-Cassia

Earlier this year, Prohibition Partners, a consultancy firm dedicated to the global cannabis industry, released an in-depth report on the legal cannabis industry in Asia. Entitled “The Asian Cannabis Report”, it reveals that the medical cannabis market could burgeon to be worth more than US$5.8 billion by 2024, although this significant surge in growth is dependent on “a number of key markets” implementing reforms regarding the legalisation of medical cannabis. Our intelligence suggests these changes could happen far sooner than most analysts expect.

The firm’s report includes “detailed market value forecasts, regulatory timeline analysis, consumption data and healthcare analyses for seven key markets in the region.” 

The continent has a tradition of cannabis use for healthcare purposes, such as Ayurveda and herbal medicines, but more recently the introduction of UN drug treaties and political pressure from the US have led to stringent attitudes and severe penalties surrounding drug use, including cannabis.

However, with the dawn of the 21st century, a number of countries on the continent are beginning to reform their views and policies toward the usage of medical cannabis. Most prominent among them are South Korea, Thailand, and Malaysia, with India also showing an openness to embrace usage of medical cannabis. Each of these countries has, in recent months, legalised medical cannabis “under government-licensed access”, as well as investing in research programmes.

As a result, the global medical cannabis industry is now turning its attention eastward, with investors eyeing up the market’s potential and striving to keep abreast of legal developments. Although Asia is home to approximately 86 million cannabis users, a mere 2 percent compared to 6-7 percent in Europe and 8 percent in America, the rise in leniency toward medical cannabis makes the continent “a key milestone” for producers of cannabis who are currently struggling in competitive markets in the West. 

Japan, Malaysia, China, Thailand, Laos, India, South Korea

While China and Japan are named by Prohibition Partners in their report as the two markets of largest value when it comes to medical cannabis, representing a whopping 90 percent, these nations remain wary of embracing the drug, though Prohibition Partners said China is “warming up to the cannabis market.” China has tremendous potential both as a consumption and production hub, and given its success in manufacturing and technology, it could also become an important centre for cannabis and hemp service provision from AI to agritech.

However, it is countries such as India, Thailand and South Korea which have taken the most significant strides toward introducing widespread usage, with both Thailand and South Korea legalising medical cannabis in recent months, despite South Korea still implementing the death penalty for the usage of other drugs.

As Kalyan Kumar of the International Business Times revealed earlier this year, Hong Kong launched a Cannabis Investor Symposium in 2018, while Thailand unveiled its first legal cannabis greenhouse in February of this year. This closed-system farming facility was financed by Thailand’s Government Pharmaceutical Organisation.

Approximately five months after its launch, in August 2019, the GPO produced approximately 10,000 bottles of cannabis oil for the usage of hospital patients, with executive managing director Withoon Danwiboon explaining that it would be used for the alleviation of nausea caused by chemo, as well as for epilepsy and aches and pains. 

As AgFunderNews (AFN) reports, GPO aims to “expand production to greenhouse cultivation” by early 2020, with the goal of producing “150,000-200,000 bottles of the oil.”

According to Danwiboon, foreign investors and importers will not be allowed to benefit from the country’s reforms for five years, however, as Thailand wishes to give its domestic industry a chance to hit the ground running. This makes outside investment difficult, and this may deter international firms from participating at this stage.

Thailand’s amendment of its 1979 Narcotic Act was described by Somchai Sawangkarn, chairman of the draft committee, as being “a New Year’s gift […] to the government and the Thai people” reported AFN

Brian Armstrong, who serves as CEO of Vinzan International, a company involved in the global cannabis trade, cited Thailand’s reform as “a major first step in Asia” which could potentially bear fruit and spread across the region. He also noted that both Laos and Cambodia are also investigating the possibilities of legalising medical cannabis, but went on to issue a caution, warning that it was important to ensure that “legally grown cannabis does not spill over into the illegal market”. 

He concluded, “It is important that all medical cannabis producers act accordingly and ensure their products are used only for medical purposes.”  

Meanwhile, further East, cautious Japan has been taking its own tentative steps into medical cannabis use, approving clinical trials for the cannabis compound Epidiolex, for the purpose of treating epileptic patients, and, in Malaysia, Health Minister Dzulkefly Ahmad expressed the view that “wrongheaded government policies” have destroyed lives, and called for “decriminalisation of drugs.”

Even Singapore has been channelling millions of dollars into research investigating the various medical “applications” of cannabis via its Synthetic Biology Research and Development initiative, with the aim of developing the “sustainable production of medicinal cannabinoids, without the need to grow the plant.”

Investment Bases – Hong Kong & Singapore

One company has already opted to set itself up in a prime position to take advantage of Singapore’s new willingness to utilise medical cannabis: CannAcubed, helmed by Glenn Davies, is an industrial cannabis producer with the majority of its operations based in China, from which it exports CBD to Europe “and other northern markets.”

“We chose (to set up base in) Singapore because of its clean and safe environment record. We want to be seen as a support base for countries across Asia that may be seeking advice or data in the industry and how this may affect future regulatory or legal amendments to policy,” revealed Glenn Davies during an exclusive interview with AgFunderNews. “It’s a strong and stable investment environment, which provides the ideal platform for growth and development.”

Also speaking to AFN, Israel Cannabis CEO Saul Kaye delivered an optimistic message for potential investors with his view that “Asia could be the number one supplier of cannabis and medical devices, and lead the way in investment”, depending on fast-changing regulation. 

“While there is positive momentum with South Korea and Thailand, regulators in APAC still have a way to go to meet the needs of patients, and the industry will need to be ready for the local market,” he explained, adding, “The Asian region has a long history of botanical medicine and cannabis should be a part of that.”

Israel Cannabis has even expressed plans to host a summit in China in 2020, such is the company’s faith in the nation as a key producer of cannabis. “China has been cultivating hemp for thousands of years, for textiles, building materials, and hemp seed oil. More recently, they have allowed two regions to cultivate hemp for CBD extraction, although locally, there is no medical cannabis allowed,” stated Kaye.

Other companies are banking on Hong Kong as an invesment gateway, given its more progressive stance when compared with Singapore. These include The Cannabis Fund, as well as other new private equity and venture capital firms eyeing up the region.

The European Perspective

Potential investors are also receiving positive indications from other quarters. Earlier this month, Health Europa published an article on its website describing Asia as “a largely untapped CBD market” and “the next enormous market opportunity” for investors. This attractiveness is attributed to the continent’s “large base of manufacturers and research laboratories” as well as “the growing scientific base and research capabilities” in several countries. 

On the other end of the spectrum, Health Europa noted that “restricted use of cannabis is likely to pose a negative impact on the market growth”, but added that “increased demand through domestic manufacturing is likely to have a positive impact on the growth of the Asia Pacific cannabis testing market in the coming years.” 

While the true potential of the Asian medical cannabis market remains speculative, due to the continuing reluctance of a number of nations to embrace reform, the fact that reticent Japan has approved clinical trials of Epidiolex should be seen as a good sign, according to David Jagielski of The Motley Fool. He writes that, if the drug trials are a success and approved by Japanese regulators, this could have a positive knock-on effect across the region, prompting “greater acceptance” of CBD treatments throughout Asia. 

In fact, he speculates that “any cannabis company producing CBD products could have an incredible opportunity to grow in Asia”, adding, “now could be a great time for a company to establish a strong position there.” 

Whether investors feel ready to embrace Jagielski’s optimistic stance or not, it seems there can be little doubt that the tide is slowly but surely turning when it comes to the usage of medical cannabis in Asia, and while in some nations change may come gradually, the current outlook, based on reports such as the one compiled by Prohibition Partners, certainly seems favourable. 

To find out more about potential investment opportunities and deals in Asia, as well as Europe, interested parties can take part in the upcoming event hosted by The Cannabis Fund in Malta on 6 November 2019. Entitled “The Green Light – Europe and Asia Cannabis & Hemp Investment”, this exclusive evening is tailored toward connecting investors with each other and with industry experts, in order to promote both deal flow and co-investment opportunities. Click here for more information about this event.