Medical marijuana offers great promise but age old challenges

By Gabriel Didham, January 20, 2020

Photo Reuters: Ognen Teofilovski

Like many, North Macedonia has enthusiastically embraced the potential of medical marijuana. In only three years, it has licenced 29 growers and processors. However, the failure of a planned law change highlights the issues facing the industry. A weak banking sector and over-indebted companies means its processing sector struggles to meet export standards. The new law would have allowed the export of dried cannabis flower buds and by-passed these problems but at the expense of the domestic industry.

Medical marijuana offers great promise but age-old challenges remain for developing countries like North Macedonia to capitalise on this opportunity

Like many, North Macedonia has enthusiastically embraced the potential of medical marijuana.  In only three years, it has licenced 29 growers and processors.  However, the failure of a planned law change highlights the issues facing the industry.  A weak banking sector and over-indebted companies mean its processing sector struggles to meet export standards.  The new law would have allowed the export of dried cannabis flower buds and by-passed these problems but at the expense of the domestic industry.

In 2016 North Macedonia became the first country in the region to legalise growing medical marijuana.  Since then it has enthusiastically embraced its potential.  There are now 29 companies with licences for growing or the production of cannabis oil and another 15 companies waiting for permits.

Local pharmaceutical companies have also seized the opportunity to innovate the production of high purity extracts of THC, the active hallucinogenic component, and branded non-psychoactive Cannabidiol (CBD) products.

Figure 1 Local CBD products under development in North Macedonia. Source: Objective Capital

The Government also has high hopes that the industry will be a much-needed boost to a weak economy.  The country’s Health Minister, Venko Filipce, has even told Reuters he expects “the cannabis industry could generate as much as one per cent of national output”.

It seems natural that a country with a strong agricultural tradition would be well placed to benefit.  The government has also attempted to ensure that the country doesn’t remain just a grower.  Under the current licencing system, flowers must be processed by separately licenced companies and export of dried flower bud is not allowed.

A seemingly sensible way to ensure that more of the value add from processing remains in the country.

In an industry which has more in common with pharmaceuticals than it does with agriculture, this has its issues.  Domestic licencing requires the pharmaceutical company to establish a separate production line and meet local Good Manufacturing Process (GMP) standards.  To export, they also need to meet GMP standards of the export market. Funding this is a challenge in a country where many private companies are heavily over-indebted and the banking sector is on life support.

Figure 2. High purity THC extracted from North Macedonia grown cannabis. Source: Objective Capital

Those companies that rushed into growing early have found this to their cost as they have struggled to find pharmaceutical companies that have been certified to meet the EU’s Good Manufacturing Process standards.  They have been stockpiling dried flower in the hope that the export law would be changed.  With accusations that the Prime Minister’s family stood to personally benefit, politics and technical issues have got in the way.  With change now looking some way off, more domestic processing that meets export standards is needed.

Many countries have failed to capitalise on the benefit of further processing their raw commodities.  Ghana is well known as a major exporter of cocoa beans that do limited further processing.  Less well known, is that in the early 1900s it was the site of the first commercial plantation for palm oil.  Palm oil is now dominated by Malaysia and Indonesia and is a “wonder-crop” of modern agribusiness.  Between the two, Malaysia differentiates itself by extracting higher value from its more sophisticated refining capacity.

It was this Ghanaian plantation that was the source for the initial success of British capitalists in Malaysia.  In analysing Malaysia’s success, Niels Fold and Lindsay Whitfield argue that it was not just better government support but a social and industrial policy that built a viable ecosystem of interlinking growers and processors that lead to success.[1]

While there is strong competition for a place in the new global cannabis industry, North Macedonia has a lot to offer.  A strong agricultural tradition, acceptable political stability, low-cost

Figure 3. Packaging line licenced for medical marijuana production in North Macedonia. Source: Objective Capital

quality labour, a prime location on the border of the EU and increasing integration into German’s manufacturing system makes it a promising story.  The ingredients are there but more work is needed on unblocking the processing and pharmaceutical side of the industry to maximise its value for the country.

 

 

 

 

[1] Developing a Palm Oil Sector: The Experiences of Malaysia and Ghana Compared, Niels Fold and Lindsay Whitfield, DIIS Working Paper 2012:08, http://www.fao.org/3/a-at286e.pdf

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