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20 June 2024
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The economic benefits of cannabis

Thailand is at a crossroads between accepting cannabis as a new kind of product or restricting its usage only to medical needs. Social views are divided: one side focuses on the negative effects on society, such as negative impacts on family and community relationships, while the other side stresses the positive effects, including easier and cheaper access for medical uses and contributions to the economy in terms of production, employment, and tourism-related activities.

This article is based on research conducted by the Thailand Development Research Institute (TDRI) which examines the economic benefits of cannabis legalisation. This research is one side of the story, complementing two related research works that focus on the social and health impacts of cannabis legalisation. Both previous articles have been published in this column. So, we suggest readers read all three, in order to get well balanced information.

Indeed, the economic benefits of cannabis legalisation start with its production. Cannabis cultivation requires investment in greenhouse construction, quality control systems, watering and fertilisation, strain selection, and harvesting. It creates an economic value chain through intermediate production activities, where parts of the cannabis plant (root, leaves, flower, for example) are processed into consumer products such as soap, shampoo, or food and beverage ingredients. Some parts are ground and extracted for direct consumption, involving trading activities and retail shops.

Our research team has explored the cannabis market and identified six major groups of cannabis products: 1. flowers, 2. cannabis accessories and gadgets, 3. household-use cannabis, 4. alternative medical products, 5. ready-to-eat products (under Food and Drug Administration regulations), and 6. non-regulated products like jellies, brownies, and cookies. These products constitute the main segments of the cannabis economy at the moment.

For the intermediate production activities, enterprises investing in cannabis plantations under the guidance of the Public Health Ministry can be divided into two groups: those selling flowers and those selling processed products, such as THC oil, including the famous extracted oil developed by civic leader Decha Siripat, a medicinal cannabis advocate. Cannabis leaves are active ingredients for Sooksaiyat insomnia treatment drugs, while roots are extracted for muscle pain relief balm.

The other major economic activity is trading via retail shops. Based on our survey, cannabis shops are concentrated in major and tourist cities like Bangkok, Phuket, Pattaya, Chiang Mai, and Krabi. Products range from dried flowers and cannabis accessories to edibles like jellies, brownies, and cookies. Notably, about 90% of consumers are foreigners with high purchasing power.

In terms of direct economic value, we find that the use of cannabis flowers and medical products are the most popular modes of consumption. It is estimated that the use of only 10% of registered cannabis plantations may generate 20 billion baht for the market, while the sale of cannabis-related products, such as grinders, pipes, rolling papers, bongs, and cannabis-mixed desserts, will add another 500 million baht in value. However, some of the cannabis-related products are imported and may not be counted as part of the Thai economy.

We also examine indirect economic impacts, which are measured as expenses in cannabis planting, from greenhouse construction and control systems to electricity, fertilisation, and soil management. These can be divided into two modes: cannabis investment, costing about 2,000 baht per plant, and expenses for cannabis growing, with farmers spending 1,000 baht per plant. Altogether, these expenses could generate returns of up to 3.5 billion baht per year.

Another economic benefit of interest is the spillover effects in the long run, defined as the induced demand from cannabis activities to their upstream economy. Based on our input-output analysis, cannabis activities induce upstream expenses of up to 10 billion baht in total, or 2.88 times the cost of cannabis planting. It also helps create jobs for at least 8,300 people and generates around 303 million baht in corporate tax.

To put it simply, on the benefit side, cannabis decriminalisation can generate considerable economic value. However, it also creates negative impacts on the economy and society. Therefore, it needs rules and regulations to properly govern cannabis use to minimise negative impacts. If that is the case, society can truly benefit from cannabis liberalisation.

It should be noted that cannabis shops established right after decriminalisation sold products at high prices. However, as more shops opened, prices contracted, and only 25% of those in the market are able to make a profit. In other words, the market for cannabis is still very volatile, and our estimates are subject to uncertainties regarding market conditions. Nevertheless, these are our best estimates based on the latest available data.

This article is part of a ‘research plan on health, economic and social impacts from cannabis and related products’ supported by the committee on research guidelines to national crisis management with regard to cannabis, the Office of Thailand Science Research and Innovation.

Writer : Sutthida Lertrujwanich, Nonarit Bisonyabut and Watcharin Tantisan researchers at TDRI

First Publish : Bangkok Post 19 Jun 2024

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