2022: Cannabis in Thailand on the Edge

Since Thailand legalized cannabis in 2018, the Thai Cannabis sector has gone nowhere fast. 2022 will be a make-or-break year for the industry.

The legal reforms announced this week are emblematic of the troubles that have beset Thai Cannabis from the beginning. What are the rules and regulations anyway?

After all of the state-sponsored hype of cannabis as an economic savior, little has been done to bring legal reforms in line with other competitive cannabis sectors worldwide.

The slow & possibly suicidal walk of Thai Cannabis

Phu Chi Fa Escarpment

A strong cannabis sector would be a Godsend to the Thai economy. The same goes for the economies of the entire cohort of emerging markets, especially the ones that seem to be spinning wheels, stuck in the same middle-income trap in which Thailand has found itself for over 2 decades.

Official announcements on legal cannabis can seem like a march of Russian dolls – as one announcement modifies the one before, which was a modification of the one before, and the one before that.

Meanwhile, interested parties wait in limbo for action. This phenomenon is an important piece of the argument against an optimistic take on the future of Thai Cannabis. It’s an important piece of the argument against an optimistic take on the future of the Thai economy, where bluster and catchphrase projects replace real policies and their execution amid a growing sense of economic decline.

One announcement, many interpretations

In Ministry Pushes Full Cannabis Legalization, The Bangkok Post reported that The Health Minister of Thailand announced the following:

What we have achieved so far is to declare that cannabis stems, roots, leaves and sprigs are not drugs. Starting next year, we’ll remove everything — stems, roots, sprigs, leaves, buds, flowers and seeds — from the narcotics list.

On the face of it, the statement suggests a key shift in policy, one for which longsuffering Thai Cannabis first movers have been hoping: the inclusion of THC-rich flowers in the array of medical marijuana options at dispensaries.

But wait, there’s more. The Health Minister said the main purpose of sponsoring the “Cannabis Kickoff on Mekong Bank” was to “encourage people to grow and process cannabis to supplement their incomes, which will in turn stimulate the economy and agricultural tourism.” This suggests that the new policy on home grows lifts the key restriction in place until now: it seems to say that you will no longer have to be a member of a “community enterprise” to grow cannabis at home. And you will no longer be limited to a certain number of plants you can grow.

The Bangkok Post frames these legal changes in terms that appear certain.

The Ministry of Public Health will next year push for the legalization of all cannabis parts, lifting the last remaining hurdle preventing full use and commercialization of the plant.

Thailand earlier removed stems, roots, leaves and sprigs of cannabis from its Category 5 narcotics list, but kept flowers and buds on it.

The new Narcotics Code, which took effect on Thursday, no longer has cannabis and hemp on it.

On the face of it, the consequences of this news are colossal. The article suggests that the sector has hit its most important milestone: Thai medical marijuana will be very much like it is in the US and Europe. THC-rich flowers and THC-infused edibles are here – the market can now launch.

Spelled out in this way, home grow legal changes will have a direct impact on Thais hit hardest by the pandemic. Anyone can grow and sell as many cannabis plants as they wish, and sell them to medical facilities – all of which are low on supply. All you need is permission. Conclusion: After 4 years, Thailand’s long and frustrating journey from cannabis prohibition to legal cannabis will culminate with a final act of full embrace of legalization

To take exception to this rosy view of Thai cannabis’ future, all you have to do is read about the same announcement on the same day from a different news source, namely, The Thaiger.

A different take on the announcement

Two days after The Bangkok Post report, Thaiger published the same news under a very different title: Thailand Seeks to Loosen Laws on Cannabis with low THC Content.

The headline in The Thaiger’s is followed by similarly deflating news for anyone infused with hope for the future of Thai Cannabis after reading the article in The Bangkok Post 2 days earlier.

Parts of the plant with low traces of the psychoactive component tetrahydrocannabinol, like the leaves and stem, were taken off the Narcotics List in December 2020. While the flowers and buds remained classified as a Category 5 narcotic as those parts were typically rich in THC.

But laws, classifying some parts of the plant as legal while parts as illegal, prevented commercialism of the plant.

So far nothing contradicts The Post’s article and everything makes sense. But the next sentence points back to the headline, making it clear that the announcement reported in The Post is not as earth-shattering as you may have thought. There’s not much to see here, since

Now, cannabis flowers and buds, with less than 0.2% THC, will be legal to use, process, and sell.

Okay then; game over, or so it seems. The news was too good to be true, all that happened was that the buds of the Hemp plant - that have virtually no THC - are also legal. Big deal, right?

But read on in The Thaiger article and there may be hope yet, as it looks like the authors are quite clueless.

Cannabis extracts containing more than 0.2% of THC will still be illegal.

How did such drivel make it to press? Extracts containing more than 0.2% of THC have never been illegal (not since the legalization of medical marijuana in 2019). And if Thailand were to ban them, its cannabis sector would be vaporized overnight.

Since the main takeaway from the article is that legal flowers are flowers from Hemp and not THC-rich cannabis plants, how is a home grow supposed to work?

At the event over the weekend, the Health Minister encouraged the public to start growing cannabis for some extra cash. Those with permission from the government can grow cannabis and there is no cap on how many plants each household can grow.

Will they only give permission to cultivate plants that they distribute? How do they verify that your flowers are low in THC? These are simple questions that lead nowhere except straight to consumer skepticism and cynicism.

A third stab at the meaning of the same statement

The same week, Vice published Cannabis Buds and Flowers Will Soon Be Legalized in Thailand. Here’s What That Means, that ran with the happy ending of The Post‘s “full cannabis legalization” while altogether ignoring the pesky business about excluding THC-rich buds and flowers. But the real value of The Vice piece is its interview with a leading Thai cannabis entrepreneur who expressed cautious optimism:

And as early as next year, cannabis flowers and buds will be legal to use, process and sell outside of medical and research settings.” It’s a move that, according to Bangkok-based cannabis entrepreneur and legalization advocate Kitty Chopaka, was “a savvy economic decision that was long overdue.

Notice that Kitty Chopaka does not say that it was a good economic decision, but rather that it was “savvy”, as in shrewd and knowledgeable; having common sense and good judgment.

If we are going to fully legalize all parts of the cannabis plant for commercial purposes next year, it will still be with a lot of caveats. It’s only a small first step.

The first step indeed. Is it me, or does Miss Chopaka seem to be in on the madness enough to see at least an outline of a method? As for which side of the ledger Kitty is on, she leaves no doubt she believes things will work out. She says:

The developments mean that the cannabis industry in Thailand is growing and will only get bigger. We could probably see a cannabis and hemp-related Thai company that might go into the stock market and big companies slowly making their way into Thailand as we become an actual market.

My take

Thailand is attempting to “slow walk” full cannabis legalization the only way they know how, through misdirection and vague talking points that don’t add up. The term slow walking is used to refer to states in the US that kicked off their cannabis sector with medical marijuana, with strategic minds reckoning that, once the political culture adjusted to the change, they would be open to the wholesale lifting of cannabis bans.

The tactic is copied to this day. And it has worked astonishingly well. Global cannabis sales will exceed USD 37.4 billion in 2021. Total cannabis sales are estimated to reach USD 102 billion by 2026,

Cannabis in Thailand: Sad or happy ending?

Speculation about the future of Thai cannabis exists on a continuum with two poles, let’s call the two end-points the Sad Ending and the Happy Ending.

Sad ending:

• completely insignificant in every way, a big letdown.

Happy ending:

• a booming market, impacting too many sectors to count, as it forges a new network of entrepreneurs, grow specialists, production specialists, cannabis scientists and others.

There are plenty of legitimate statistics on Southeast Asia that tilt the scales in the “happy ending” direction:

Globally, investors are excited. According to the latest Bloomberg study of foreign direct investment, about 46% of decision-makers are optimistic about the global economy, Higher than before the pandemic.

Many of them are looking at ASEAN for emerging opportunities.

As a bloc, Southeast Asia has 660 million people, making it the third-largest consumer base in the world. The region has agreed to several trade deals in recent years, opening up this market to enormous investment potential, yet many of Southeast Asia’s people remain outside the formal financial and commercial system, representing what many investors see as a future untapped opportunity as the region becomes more prosperous.

Joseph Incalcaterra, Director, Chief ASEAN Economist, Asia Pacific, HSBC

From 2020 up to the finish line of 2021, The Health Ministry’s PR campaign has been relentless – encouraging consumption and the sale of cannabis. The Ministry claims, early and often, cannabis will have a massive economic impact very soon, suggesting that it will be the lifeline that this pandemic-battered economy so desperately needs.

Pessimistic entrepreneurs in Thailand

How realistic are such claims? I was talking with a Thais cannabis grow specialist – once a partner in the nascent cannabis business in northern Thailand, just after legalization – who said he finds it next to impossible to believe that the cannabis will spark a new era of economic growth, given current constraints.

He describes a closed subculture of cronies, unwilling to open the gate of the free market and let others have a shot. For the grow specialist’s bitter experiences and pessimism for the future, chalk one up for the “sad ending” side of the ledger.

An ex-pat spa entrepreneur based in Thailand points to the same administrative inertia, in a similar tone of resignation. He responded to my questions this way

Our FDA direct contacts have no clues as to what is allowed and not. Our product application is just hanging there in a twilight zone.

There is a gap between perceived policies and the actual regulatory frame, and a serious lack of communication training for the staff down the line.

I think it is more about perverting the system so that only a few players can benefit on a large scale. I call it politics rather than corruption although I understand that favoritism on that scale is calling for some returns.

Investors remain bullish

Not all cannabis investors concur with the cannabis grow specialist and the ex-pat spa manufacturer: we know bets have been made already and more are on the way – as in the first two quarters of 2022. When it comes to the pessimism that scoffs at the idea of a healthy Thai cannabis sector, one investment of foreign capital rebuts a thousand prophets of doom. Investors tilt the scales to a happy ending.

And the bevy of scientists and research assistants dedicating themselves to Thai cannabis research? Optimists, of course, but the pessimists would point out that they are paid to stay cheerful about the future.

Yet, the investors’ decisions to bet on Thailand were made before the announcement that the entire cannabis plant was to be taken off the narcotics list. The chances of these investments and these attitudes dissipating soon seems remote, now that the cat is out of the bag and Thai cannabis is making noise as though it’s ready to step up to the world of global cannabis.

Indeed, investors often get it wrong; it could all be just pretty words and transitory hype. The great Thai cannabis sector could end up being little more than a ship of fools riding the rails atop a gravy train for a few years until the inevitable end of the line. Not that the sector’s success would be a mystery over those years. We’ll know how Thailand handled its cannabis moment of opportunity by the end of 2022.

Competition waits for no crony

If Thailand can leverage cannabis to sweep away some of the bureaucratic rot and old, double-talking ways - creating a new cannabis sector in the process - it stands to gain

a) a new sector with infinite possibilities

b) growth of private enterprise generally

If Thailand cannot muster enough market transparency to attract foreign investment, cannabis capital only has to veer a few degrees due East to reach Cambodia or Laos. Meanwhile, Malaysia is close behind with legal reforms grinding through the courts and research ramping up in the universities.

If Thailand does not or cannot stop its public relations runaround and start giving the cannabis sector sensible regulations, a world-historic opportunity could be lost for the obvious reason that it’s presented to a political economy that suffers from poor economic policies. The end is coming in 2022; the question is will it be happy or sad.