Thousands of cannabis businesses in Thailand are bracing for major legal and regulatory changes as the country looks to curb adult-use sales and pivot the industry back to a medicinal market.
The government’s latest draft cannabis law looks to end a legal vacuum that unintentionally allowed the recreational marijuana industry to flourish after a 2022 decision to declassify the drug as a narcotic.
The new law could radically alter the business prospects for thousands of cannabis store owners and cultivators if they’re not fully compliant – depending on how authorities choose to enforce any new rules.
Some of the draft law’s proposed changes include:
- Moving to a license system for personal cultivation, away from a simple notification system.
- Giving police more authority to enforce key components of the law, particularly the ability to seize products from rule-breaking businesses.
- Prohibiting the sale of smokable marijuana outside the medical market (though the government hasn’t said how it plans to differentiate between medical and recreational.)
- Issuing fines and prison sentences for anyone – including business proprietors – who violates the law.
Pongchaiwat Jirayustienjinda, an associate at Bangkok-based Tilleke & Gibbins and a member of the law firm’s marijuana team, said the pending draft of the Cannabis and Hemp Act prohibits any use of the plant for recreational purposes, including smoking.
“However, the draft is still under consideration, and the public hearing was just completed at the end of January 2024,” he told MJBizDaily via email.
“There are still more legislative proceedings, which may change that prohibition until the draft Cannabis and Hemp Act becomes effective and implemented.”
The draft law maintains a ban on most commercial imports of medical marijuana, effectively similar to Canada’s situation.
Canada’s law doesn’t explicitly ban commercial medical imports, but the country has chosen to not allow them and has never answered why.
Whether Thailand’s new law might encourage or discourage foreign direct investment is uncertain.
Some experts say the Thai government’s pivot away from adult-use marijuana might make the country’s market more appealing to international businesses keen to invest.
Mitchell Osak, president of Toronto-based Quanta Consulting, said the Thai government faces a daunting task in its attempt to reboot the industry.
“They let the genie out of the bottle with descheduling,” he said.
“How they put the genie back in the bottle is going to be one of the biggest questions and challenges they will face when drafting the new regulations.”
What went wrong
To understand the current situation and potential future path for the Thai cannabis industry, it’s important to understand what went wrong.
After Thailand decriminalized cannabis in 2022, the Ministry of Public Health (MoPH) stated that recreational use was never part of the plan.
Instead, government officials said the public policy goal behind delisting cannabis as a narcotic was to support medical wellness and to help the economy.
However, adequate legal and regulatory mechanisms were never implemented to stop adult-use cannabis businesses from opening, and political momentum to finalize related regulations was halted by national political issues and never completed.
“There are no proper set of regulations in place when compared to (some cannabis jurisdictions in) the West. There are some rules, but it’s essentially the wild, wild, East,” Nadon Chaichareon, CEO of Bangkok-based Teera Group, said in a phone interview.
“There’s no governance. There’s so many people doing it, the government doesn’t have the manpower to review everything.”
In the ensuing legal and regulatory vacuum, thousands of marijuana retailers opened – sometimes as simple cannabis “stands” on the side of the street.
The country’s estimated 6,500-plus marijuana stores aren’t necessarily illegal, he said, because a lot of them are following the rules that do exist and some operate in a sort-of gray area with cannabis being delisted as a narcotic.
“The ones who aren’t following the rules will be weeded out. I have a feeling a lot of them will close down,” he said.
“For home production here, people can sell it. It’s a free-for-all.”
Part of the problem for home is that the current system is notification-based, without any of the follow-up from regulators that is common in other countries.
Other shortcomings of the current legal and regulatory situation include:
- There are no testing requirements.
- There is no traceability or seed-to-sale program for marijuana products.
- Lawmakers did not implement cannabis-specific taxation to offset regulatory compliance costs.
New law, same focus
Thailand’s draft law looks to implement significant changes to the cannabis industry, removing adult-use loopholes and steering the regulated sector back to a focus on health and the economy, which was the original intention of the 2022 law.
“Cannabis was supposed to be a new cash crop for Thai farmers and businesses. That policy is too foreign to us now,” Chaichareon said.
One of the biggest changes, Chaichareon said, is the shift to a full license and approval system instead of a notification and registration system for personal cultivation.
The draft law contains seven proposed license types: cultivation, manufacturing, import, export, sales, temporary import and temporary export.
There are three sizes for commercial cultivation licenses: Below 5 rai (1.97 acres), 5-20 rai (1.97-7.9 acres) and 20-400 rai (7.9-158 acres).
The proposed law specifically stipulates that adult-use sales will not be permitted and existing stores won’t be allowed to sell dried cannabis for recreational smoking.
Potential cannabis business licensees must:
- Be a Thai national older than 20.
- Have an address in Thailand and have no convictions in the past two years.
For a company to get a license, it must have a headquarters in Thailand, the director must be a Thai national and the company should be majority-owned by a Thai national.
The draft law proposes to implement certain prohibitions, including:
- Banning sales of marijuana and extracts for adult-use purposes.
- Prohibiting online sales.
- Banning sales at unapproved street stalls.
- Attractive pricing strategies.
Police are being given more authority to clamp down on illegal sales, and cannabis extracts with more than 0.2% THC would be classified as narcotics.
The new law proposes giving police the authority to search a cannabis business and seize products if the company is found to be violating any rules.
Previously, law enforcement did not have such power.
Legislators also are considering criminal and financial penalties, including fines and jail time.
For instance, illegal cultivation of less than 5 rai might result in a fine of 20,000 baht ($560) and a year in jail. Illicit cultivation larger than 5 rai could be punishable by a $8,420 fine and three years of jail time.
Illegal cannabis importers could be subject to $14,000 in fines and five years in jail.
Where some countries legalize certain cannabis use and rely on imports, Thailand is going the opposite route.
Chaichareon said commercial medical imports of raw cannabis flower, hemp flower or extracts will not be allowed.
Instead, cannabis imports will be allowed only for:
- Scientific research, education and testing.
- The Thai Red Cross.
- Use by government-licensed medical cannabis patients.
- Seeds and new cultivars.
The new draft law doesn’t appear to have track-and-trace requirements.
Chaichareon said Thai businesses that follow the rules shouldn’t be too worried.
He cautioned, however, that those flouting the law – including those openly promoting and selling illicit marijuana online, foreigners selling hash and concentrates (which would be banned under the draft law) and anyone selling imported cannabis – should be concerned.
“Follow the rules of the land and set the right standards,” Chaichareon said.
“If you don’t respect the law, you don’t create issues just for yourselves but potentially also for others.” (Full Story)