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The Advantages of Cannabis in the Economy

The Advantages of Cannabis in the Economy

Thailand is currently facing a pivotal decision regarding the broader acceptance of cannabis as a commodity or restricting its use solely to medical purposes. There is a divergence of opinions in society: one side emphasizes the potential negative societal impacts, such as strains on family and community relationships, while the other underscores the positive aspects, including easier access for medical applications and the economic contributions through production, employment opportunities, and tourism-related ventures.

This article is drawn from a study conducted by the Thailand Development Research Institute (TDRI), focusing on the economic advantages of the legalization of cannabis. This analysis is one aspect of the narrative, complementing two additional studies that delve into the social and health consequences of cannabis legalization, both of which have been published in this series. Therefore, it is recommended for readers to explore all three articles for a comprehensive understanding.

The economic benefits of legalizing cannabis commence with its cultivation. Cultivating cannabis involves investments in greenhouse infrastructure, quality assurance systems, irrigation, strain selection, and harvest. This process initiates an economic value chain through intermediary production activities, transforming segments of the cannabis plant into consumer goods such as soaps, shampoos, or ingredients for food and beverages. Some components are processed for direct consumption, facilitating trade activities and retail outlets.

Through market exploration, our research team has identified six primary categories of cannabis products: flowers, cannabis accessories and devices, household-focused cannabis items, alternative medicinal products, ready-to-consume items compliant with Food and Drug Administration regulations, and unregulated products like jellies, brownies, and cookies. These products represent the core segments of the current cannabis economy.

In terms of intermediary production activities, enterprises engaging in cannabis farming under the supervision of the Public Health Ministry can be classified into two groups: those selling flowers and those offering processed products like THC oil. Cannabis leaves are utilized as active ingredients in insomnia treatment drugs, while roots are extracted for muscle pain relief balms.

Another major economic activity involves trading through retail establishments. A survey has indicated that cannabis shops are predominantly found in major cities and tourist destinations such as Bangkok, Phuket, Pattaya, Chiang Mai, and Krabi. Products range from dried flowers and cannabis accessories to edibles like jellies, brownies, and cookies, with approximately 90% of consumers boasting significant purchasing power typically being foreigners.

From a direct economic standpoint, the consumption of cannabis flowers and medical items stands out as the most preferred. Utilizing solely 10% of registered cannabis plantations could potentially yield a market value of 20 billion baht, with an additional 500 million baht contributed from sales of cannabis-related products. However, some of these products might be imported and not factored into Thailand’s economic statistics.

Furthermore, we have assessed indirect economic impacts, encompassing expenses related to cannabis planting. These expenses cover investments in greenhouse facilities, control systems, electricity, fertilizers, and soil management, divided into cannabis investment costs and farming expenses per plant. These collective expenditures could result in annual returns of up to 3.5 billion baht.

An additional compelling economic benefit is the long-term spillover effects, denoting the stimulated demand from cannabis activities on the overall economy. Based on our input-output analysis, these activities induce upstream expenditures totaling 10 billion baht, equivalent to 2.88 times the costs of cannabis planting. This phenomenon also contributes to job creation for approximately 8,300 individuals and generates around 303 million baht in corporate tax revenue.

In essence, the decriminalization of cannabis holds significant economic potential, albeit with consequential impacts on both the economy and society. Hence, effective regulatory frameworks are essential to govern cannabis usage adequately and mitigate adverse effects. By implementing robust regulations, societies can derive tangible benefits from the liberalization of cannabis.

It is important to note that following decriminalization, some cannabis shops initially sold products at premium prices. Nevertheless, as more shops entered the market, prices normalized, and only a quarter of these enterprises were profitable. The cannabis market remains volatile, and our estimations are contingent on evolving market conditions, framed by the most recent data available.

The researchers, Sutthida Lertrujwanich, Nonarit Bisonyabut, and Watcharin Tantisan, are affiliated with the Thailand Development Research Institute. This article forms 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 concerning cannabis within the Office of Thailand Science Research and Innovation. TDRI’s policy analyses are published in the ‘Bangkok Post’ biweekly.

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