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Friday, Jul 19, 2024

CBD ban foreshadows stricter Hong Kong post-Covid

CBD ban foreshadows stricter Hong Kong post-Covid

In under two years, Hong Kong went from one of the most promising markets in Asia for CBD products to putting face creams containing the cannabis-derived ingredient on par with heroin or methamphetamine.
A new law that criminalizes the possession and consumption of cannabidiol, the non-psychoactive ingredient in cannabis plants, came into effect Feb. 1, and anyone found guilty of importing, exporting or manufacturing it faces up to life in jail and a fine of HK$5 million (US$637,000). Previously the government had limited the ban to cannabis and its psychoactive derivative THC, allowing a nascent CBD industry to grow.

Hong Kong’s zero-tolerance pivot comes right as the government launches its “Hello Hong Kong” campaign, aimed at boosting its image among foreign investors and tourists after years of Covid isolation. Yet as the city counts on an influx of visitors to revive its economy, which contracted 3.5 percent last year, the CBD ban potentially marks a more controlled era for the financial hub — long-known for a freewheeling social scene that set it apart from rival Singapore — after the National Security Law the put an end to a swathe of civil liberties.

While carrying CBD-infused oil for back pain is not the same as the right to gather in protest, a shroud of increased policing and punishment throughout Hong Kong society unites them.

Hong Kong’s government has defended the change in policy by arguing that CBD could decompose or be converted into THC. But some in the industry believe that the city’s decision was also made to bring it closer to drug regulation in mainland China, which banned the use of CBD in all cosmetics in 2021.

“Let’s say you come from a legal hemp country, Europe, America, Australia even, and you’re carrying a hemp protein bar that is illegal,” said Saul Kaye, founder of Israel-based cannabis startup accelerator iCAN. “That could get the person into a lot of trouble and the person might not even realize because it’s a legal product in their country.”

Hong Kong authorities made their first CBD arrest last month in connection with an air parcel from Denmark labeled as skin oil.

With tourists prone to running afoul of the law, foreign governments are on high alert. Thailand’s foreign ministry last week issued a warning against bringing CBD items into Hong Kong. The US State Department urged its citizens to review their luggage to ensure items — “including oils, lotions, supplements, and cosmetics” — do not contain the ingredient. Animated videos on inbound flights to the city warn visitors of the consequences of carrying CBD products.

Hong Kong’s total ban comes as CBD rapidly gains popularity worldwide for its calming and analgesic properties. Even some countries in Asia, a region known for its zero-tolerance stance on drugs, are shifting their attitudes. South Korea legalized medical marijuana in 2018, but under strict conditions, while Japan is eyeing similar plans for patients with incurable conditions.

The biggest change came in Thailand, which last year became the first Asian nation to decriminalize cannabis. Though political and legal uncertainties are still clouding the industry’s future there, cannabis businesses have already sprung up all around the country, and foreigners are flocking there to visit dispensaries and buy products like edibles and massage oils.

To be sure, Hong Kong is not the only place in the region to outlaw CBD, while drug trafficking in countries like Singapore and Malaysia are punishable by death. And there's some evidence from the US that legalizing CBD could be a slippery slope. The easy availability there and the patchwork of state-by-state laws allowing THC has led to an explosion of cheap imitators that are made from hemp and CBD with unknown health consequences.

Still, prior to the ban, the city had seemed at least open to the industry's financial opportunities. In 2018, a function room at the seafront W Hotel in West Kowloon bristled with excitement as Hong Kong’s first-ever cannabis investment conference kicked off. The one-day event promised to connect growing businesses with capital.

“It was definitely forward-thinking in regulation and more western than China was,” said Kaye, who co-organized the event. “It’s a monetary center so we thought there would be listings on the Hong Kong stock exchange for cannabis companies.”

A crop of businesses selling everything from CBD oil to beer sprung up. Tom Lorimer, co-founder of London-based CBD oil business OTO, said his company was on track to make HK$5 million in 2022 following deals with local luxury department stores and malls. But authorities slammed the brakes on the CBD boom last year, and residents were given three months to toss out soon-to-be-illegal goods in amnesty bins around the city.

“In one fell swoop, we closed our doors and put our energy and resources into new and CBD-nascent markets, such as Japan and the UAE,” said Lorimer. “Despite a growing need for functional plant-based adaptogens across society, Hong Kong, following China’s move last year, has sadly bucked the global trend towards greater acceptance of hemp-derived products.”

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