Medical cannabis is gaining momentum in Asia


Hemp plants are grown for medical research purposes in the province of Chiang Mai, Thailand.

Taylor Weidman | Bloomberg | false images

With the legalization of medicinal cannabis in Thailand in February, some experts predict that other Southeast Asian countries can act to decriminalize the plant.

If that happens, it could be an important opportunity for investors interested in space.

Many countries in Asia have made strict punishments for possession, trafficking and consumption of cannabis, including, among other things, the ongoing bloody war against drugs in the Philippines. However, some nations are softening their attitude towards the drug that was once taboo, and take it to hospitals in the region.

The global legal marijuana market, including recreational use, was estimated at $ 13.8 billion last year and is projected to reach $ 66.3 billion by the end of 2025, according to a 2018 report from the market research firm with headquarters in California Grand View Research.

There are two widely studied components of the cannabis plant: CBD, a non-hallucinatory compound sold in sprouts, oils and tinctures, which is used to calm inflammation and nerves; and THC, the psychoactive component that is used most frequently for recreational purposes and remains illegal in most countries.

According to a 2018 report by the European Drug and Drug Addiction Monitoring Center, both CBD and THC ingredients are applied in medicinal practices, but are used to treat different symptoms.

Moment in the region

Currently, Canada and Uruguay are the only two countries that have fully legalized the recreational use of cannabis. But the gradual legalization of medical marijuana has spread throughout the world, including, in particular, to nations such as Israel, Australia and Germany.

In Asia, Seoul and Bangkok seem to lead the way in the normalization and legalization of medical marijuana with government license. Thailand is the only country that has fully legalized medicinal cannabis with others who are actively investigating the plant's health care applications, according to Prohibition Partners, an international consultancy in the cannabis industry.

Thailand, meanwhile, unveiled its first legal cannabis greenhouse in February.

"The attitude is that it is already part of traditional medicine (…) and we must make sure that Thais can control their own industry," Jim Plamondon, head of marketing at Thai Cannabis Corporation, told Reuters last December.

South Korea surprised many by being the first East Asian nation to legalize medical marijuana last November. The policy came into effect in March of this year with the aim of expanding treatment options for patients with epilepsy, chronic pain and other conditions.

In the same month, Japan approved clinical trials for the cannabis compound Epidiolex, an oral solution of CBD used in the treatment of epileptic patients.

In western markets, recreational cannabis is expected to outperform medical cannabis in market forecasts, but in Asia the opposite is likely to occur.

Members of the prohibition

The Asian Cannabis Report 2019

In late June, Malaysian Health Minister Dzulkefly Ahmad said in a statement: "Drugs have destroyed many lives, but wrong government policies have destroyed many more, and I think it is obvious that after 40 years of war against the drug has not worked, the drug should be decriminalized. "

He added that legalizing medical cannabis would be a "game change".

Even famously strict anti-drug nations, such as Singapore and China, have participated in research on medical applications for cannabis.

Investment opportunities in Asia

Everything indicates a softer tone than those countries have traditionally taken, but the plant remains illegal in most Asian nations. Still, Prohibition Partners estimated that the medical cannabis market in Asia could reach 2024 billion in 2024.

"In western markets, recreational cannabis is expected to outperform medical cannabis in market forecasts, but in Asia the opposite is likely to occur," the consultancy said.

Japan, on the one hand, will most likely become a large consumer of medicinal cannabis.

"Japan currently has the largest population of older people, with 33.1%, and is expected to generate an unprecedented increase in the costs of long-term care," said the group's 2019 report. "It is estimated that health spending in the region will reach 2.7 trillion dollars by 2020."

And Japan is not the only one facing the aging of the population. By 2030, 17.8% of China's population is expected to be over 65, according to The Economist Intelligence Unit. The report added that Asia is on track to have the oldest population in the world very soon and with old age many chronic diseases.

In terms of investment opportunities, many are still reluctant to actively bet on the product because of the social stigma surrounding the plant, according to Prohibition Partners. Even so, Hong Kong saw its first Cannabis Investors Symposium in November of last year.

"Chinese investors are heating up in the cannabis market," the consultancy said, noting that despite its illegality in China, the research on medicinal cannabis has received some government encouragement.

In fact, China is not only involved in research but also to a large extent in production. Asia's largest economy currently cultivates almost half of the world's legal hemp, a cannabis strain that contains almost no hallucinogens, according to China's National Bureau of Statistics.

A distributor holds a jar of medicinal cannabis in Buriram, Thailand.

Lillian Suwanrumpha | AFP | false images

Hanma Investment Group (HMI) is the first company to receive a permit to extract CBD in China. The largest hemp production company in the country has been advocating for the benefits of the plant and trying to change the negative connotation that most Chinese people have towards it. Currently, the company exports 90% of its production, mainly to the United States, Germany, the United States, the Netherlands and, increasingly, Japan.

"The perception of cannabis (in China) is not as negative as before, and we reiterate that cannabis can be used in the medical and health sector," Tan Xi, president of HMI, told CNBC in a text message. Chinese.

Tan added that in a telephone interview there was an increase in the number of Chinese companies involved in industrial cannabis. Since the beginning of 2019, he said, there has been significant traction in China's capital market for such companies.

Tan said he was encouraged by the growing number of US states that legalized medical cannabis, but said China does not seem close to legalizing it in the short term.

& # 39; Desolation on the earnings front & # 39;

Some experts have warned investors to avoid being too optimistic about investment opportunities in the cannabis industry because there are still many unanswered questions about legalization, acceptance and business models.

On the one hand, the seemingly robust legal market for cannabis in Canada has so far been "devastating on the earnings front," due to high operating expenses, according to an EY report of October 2018.

Experts familiar with Asia said that countries in the region will probably not legalize the plant for recreational use in the short term, but there are still challenges ahead for medicinal use. In particular, the cost of building the infrastructure for production and distribution will be high and it may take a while before there is full acceptance of the product.

The general acceptance of "medicinal cannabis use may be slower in Asia because cannabis use rates are much lower than in North America, Australia and the EU, and policies on the use of illicit drugs have traditionally been punitive", said Wayne Hall, a professor of abuse research at the University of Queensland.

Ultimately, the acceptance of medicinal cannabis will depend on accessibility, whether the plants are grown locally and the price is affordable, the professor said.

– Reuters contributed to this report.

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