Medical cannabis is gaining momentum in Asia

With the legalization of cannabis for medical purposes in Thailand in February, some experts predict that other countries in Southeast Asia could shift to decriminalizing the plant.

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

Many Asian countries have made headlines for harsh penalties for possession, trafficking and use of cannabis, including the ongoing bloody war on drugs in the Philippines. However, some countries are softening their attitude towards the once-taboo drug and sending it to hospitals in the region.

The global legal marijuana market – including recreational uses – was expected to reach $ 13.8 billion last year and reach $ 66.3 billion by the end of 2025, according to a report released in 2018 by market research firm Grand View Research based in California.

The cannabis plant includes two widely studied components: CBD, a non-hallucinating compound sold in bud, oil and tinctures, used to calm inflammation and nerves; and THC, the psychoactive constituent most often used for recreational purposes and still illegal in most countries.

According to a report published in 2018 by the European Monitoring Center for Drugs and Drug Addiction, ingredients based on CBD and THC are used in medicinal practices but used to treat different symptoms.

At present, Canada and Uruguay are the only two countries to have fully legalized the use of cannabis for recreational purposes. But the piecemeal legalization of marijuana for medical purposes has spread around the world, especially in countries such as Israel, Australia and Germany.

In Asia, Seoul and Bangkok seek to pave the way for the standardization and legalization of marijuana for medical purposes with a government license. Thailand is the only country to have completely legalized medical cannabis with other countries that are actively studying the applications of this plant in the health care field, according to Prohibition Partners, an international consultant in the cannabis sector.

Thailand, for its part, unveiled its first legal cannabis greenhouse in February.

"We think this is already part of traditional medicine (…) and we need to make sure that Thais can control their own industry," said Jim Plamondon, Marketing Manager at Thai Cannabis Corporation at Reuters last December. .

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

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

In late June, Malaysian Health Minister Dzulkefly Ahmad said in a statement: "Drugs have destroyed many lives, but wrong government policies have destroyed many of them. It is obvious that after 40 years of the war on drugs, it has not worked … to decriminalize drugs. "

He added that the legalization of medical cannabis would change the game.

Even countries known for drug addiction, including Singapore and China, have been involved in research into the medical applications of cannabis.

All this indicates a softer tone than what these countries have traditionally adopted, but the factory remains illegal in most Asian countries. Nevertheless, Prohibition Partners has estimated that the Asian market for medicinal cannabis could reach $ 5.8 billion by 2024.

"In Western markets, recreational cannabis is expected to outpace the performance of medical cannabis in market forecasts, but in Asia, the opposite is probably true," the consulting firm said.

Japan, for its part, will most likely become a major consumer of medical cannabis.

"Japan currently has the highest number of elderly people at 33.1%, which should lead to an unprecedented increase in long-term health costs," says the group in its 2019 report. Health care region is expected to reach 2.7 trillion US dollars by 2020.

And Japan is not the only country facing the aging of its population. According to The Economist Intelligence Unit, 17.8% of the Chinese population is expected to be over 65 years old. The report adds that Asia is about to have the world's oldest population very soon and that many chronic diseases occur with old age.

As for investment opportunities, many still hesitate to actively bet on the product because of the social stigma around the factory, according to Prohibition Partners. Still, Hong Kong hosted its first-ever Cannabis Investor Symposium last November.

"Chinese investors are preparing for the cannabis market," said the consulting firm, noting that, despite its illegality in China, research on medical cannabis has been encouraged by the government.

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

Hanma Investment Group (HMI) is the first company to receive permission to extract CBD in China. The largest hemp production company in the country pleads for the benefits of the plant and tries to change the negative connotation that most Chinese people attribute to it. The company currently exports 90% of its production, mainly to the United States, Germany, the United Kingdom, the Netherlands and increasingly Japan.

"The perception of cannabis by the Chinese (Chinese) is no longer as negative as before.We reiterate that cannabis can be used in the medical and health sector," said Tan Xi, president of HMI, to CNBC in a text message in Chinese.

Tan added in a telephone interview that there had been an increase in the number of Chinese companies involved in industrial cannabis. Since the beginning of 2019, he said, the capital market in China has grown strongly for these companies.

Tan is said to be encouraged by the growing number of US states legalizing cannabis for medical purposes, but added that China did not seem poised to legalize it anytime soon.

Some experts have warned investors to avoid being overly optimistic about investment opportunities in the cannabis industry because many questions about legalization, acceptance and the commercial models remain unanswered.

On the one hand, the seemingly robust legal cannabis market in Canada has so far been "bleak on the profit front", because of high operating expenses, according to a report by EY. October 2018.

Experts familiar with Asia said that the countries in the region would probably not legalize the plant for recreational purposes, but that difficulties remained with regard to medicinal use. In particular, the cost of building the production and distribution infrastructure will be high and it may take some time before the product is fully adopted.

The general acceptance of "cannabis use for medical purposes may be slower in Asia as cannabis use rates are much lower than in North America, Australia and the United States. European Union and that illicit drug policies are traditionally punitive, "said Wayne Hall, substance. Professor of Research on Abuses at the University of Queensland.

In the end, the acceptance of cannabis for medical purposes will depend on accessibility – that the plants are grown locally and at an affordable price, the professor said.

– Reuters contributed to this report.