Foreign investments in Thailand’s cannabis industries
Cannabis, marijuana, hashish, hemp, and ganja – destigmatization dreams in Thailand
Thailand‘s cannabis potential is currently on everyone’s lips. In an overheated discussion, the business opportunities for foreigners are easily overestimated. This applies to the opportunities that current and future legislation offers to foreigners, but also to the opportunities to earn from the cannabis boom through partnerships with Thai individuals and institutions.
CoronaAlliance: The cannabis industry should not be affected by the pandemic in the long term. Instead, cannabis with its strict regulations and controlled cultivation should be among the winners of the post-pandemic world. Investments are therefore sensible and sustainable even from today’s perspective. The Thai government will do well to pave the way for this high-value industry and accelerate the sequence of market facilitation measures once the acute pandemic is over. #CoronaAlliance
Four sectors: Basically, there are four possible business areas to distinguish. These are firstly the cultivation for and the medical use of cannabis and secondly the research and development of cannabis products. The third is recreational drugs and the fourth covers measures and products related to the industry.
Medical cannabis tourism: While the national ban on international travelers remains in place for an unclear period of time, Thailand is looking at how to resume tourism. After legalizing cannabis for medical use, Thailand has soon the chance to win quality guests in the land of smile by focussing on medical cannabis tourism as one of the unique selling points for holiday locations like Phuket, Samui, Hua Hin and more. This could be a highly attractive foreign investment opportunity to combine the best of Thailand’s tourism with a well-considered investment in one of Thailand’s most promising money-making industries.
Controlled substances: Cannabis comes in various flavors. In 2019, the seeds and oils extracted from some marijuana strains have been removed from the list of controlled substances under Category 5 of the Narcotics Act. As a Class 5 narcotic, hemp itself cannot be legally cultivated, imported, exported, sold, possessed or consumed without a permit. In January 2020, Thailand’s cabinet agreed in principle to take hemp off the narcotics list. When a final resolution is passed by the cabinet, the public health minister will issue a ministry regulation which will be announced in the Royal Gazette. This would effectively allow the use of hemp oil and seeds as ingredients in locally-made drugs, food and cosmetics products.
Licensing is possible and necessary for the manufacturing, selling, importing, exporting, and possession of controlled products. The licensing process is typically a multi-step process with a variety of requirements to the applicant, its shareholders, and its business operations. Generally, foreign and other private entities are banned for five years (till 19/02/2024) from the application process.
Current legislation: It is a misconception that Thailand has unclear or gray areas in respect to its cannabis industry. Simply said, the list of controlled substances has recently been adjusted. The use for medical purposes has been allowed under strict limitations. All possession or consumption outside of this area is illegal.
Further developments are promised but it is open at which point in time they would be binding laws. The paper of the Food and Drug Administration might be subject to fundamental changes or might never be implemented. Apart from the timing uncertainty, the currently available proposals for legislation are more general concepts than coordinated drafts. They do not give any binding direction for future action and are a weak basis for current investments in the industry. The statement that the FDA proposals “now look likely to become law in the very near future” is bold and risky. For a certain venture, a risk assessment could and should be carefully made.
Penalties: Connoisseurs and cultivators of marijuana like to draw a world of legal cannabis use that does not exist and probably will never exist in Thailand. Crossing the red lines not only endangers the foreign investment but also leads to maximum criminal penalties. Better safe than sorry.
Foreign joint venture investment opportunities in Thailand’s future cash crop
Foreign quota: For the foreign investor, his limitations and restrictions regarding Thai cannabis ventures are essential parameters. A cardinal issue is the maximum foreign participation which might be limited at 33%. The possibility and limitations of preference share structures, minority rights, and shareholders agreements should be carefully assessed.
JV Structuring: With respect to the investment structure and strategy, highly dynamic legislation has to be considered as well as the economic interests of the Thai interest groups. Joint venture and research contracts with Thai universities, the allocation of duties and obligations, responsibilities, and profit allocation need valid agreement. Cannabis (joint) ventures are not the territory of hand-shakes and promises but of legally binding agreements and full compliance with corporate, investment, and foreigner legislation.
Assessments: In order to invest in Thailand’s cannabis industry, sober legal advice is of particular importance. The ecstasy about the liberalization of the marijuana industry must not tempt one to interpret business opportunities in areas that do not exist after the intoxication has slept off. To qualify prohibited areas as unclear is a marketing concept based on wishful thinking.
Professional services from Bangkok in Thailand’s cannabis, hemp, and other agribusinesses
PUGNATORIUS Ltd. is the Bangkok-based specialist provider of transactional legal and tax advice on foreign investments in Thailand’s manufacturing and service industries as well as property developments and acquisitions. The law firm has a particular interest, know-how, and experience with respect to agriculture, including livestock investments and fishery ventures.
The law firm has long-lasting expertise on Thailand’s agribusinesses, has been the lecturer and keynote speaker on various agriculture and plant science congresses in recent years, and has the proven knowledge on related areas like BOI promotion and secured investment structures in the agribusiness sectors. This distinguishes the firm from the newcomers, who jump on the bandwagon to benefit from the new Thai magic of the words cannabis, marijuana, and ganja.
Cannabis advice: PUGNATORIUS Ltd. provides realistic advice on the scope and structure of promising investments in Thailand’s cannabis markets. It provides information and legal opinions on the regulatory framework. It has practical experiences to negotiate cooperation with Thai research institutes, medical schools, pharmacy schools, pharmaceutical laboratories, universities, hospitals, and clinics. PUGNATORIUS assists and supports in the licensing process and to obtain additional approvals and permits.
Foreign companies: The Bangkok law firm advises on the limitations of online and offline marijuana information in Thailand, limitations for sales and marketing for Thai consumers from abroad, as well as the production and sale of cannabis-related tools and machinery.
Details on the full scope of professional services in Thailand’s agriculture and agribusiness industries is described at “Legal advice and transaction support for foreign investments in Thailand’s agribusiness“.
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