Mention cannabis and our minds turn to a healthcare industry now worth billions. Its leaves used as a balm to treat the ailing, the plant has proven remarkably versatile in addressing a range of health issues. Clinical research has demonstrated its effectiveness in managing chronic pain and patients with debilitating conditions like multiple sclerosis have found relief in its ability to reduce muscle spasms and stiffness. Moreover, it holds promise in mitigating the severe weight loss and nausea associated with chemotherapy, offering some semblance of comfort to cancer patients. 

Europe’s emerging cannabis market 

The landscape went from a hidden pastime to a hive of legitimate commerce – red eyes no longer a product of a weed-induced haze, but the relentless glare of market charts. In Europe alone the industry’s growth has been significant, with its value reaching approximately $8 billion in 2023. The use of cannabis, once on the margins of medicine and society, has now moved to the forefront, with the industry projected to grow at a compound annual rate of approximately 15% between 2023 and 2027. 

Across the Atlantic, the United States has already witnessed the lucrative waves of this ‘green rush’. After the 2008 economic recession forced cuts to law enforcement budgets, the financial crisis heralded a marked change in policy towards the substance. By 2012, with medical cannabis available in 18 states, voters in Colorado and Washington approved cannabis for recreational, not just medical, use. 

Today, with a market valued at a USD 33 billion and legal frameworks supporting both leisure and medical applications in most states, it offers a glimpse into Europe’s potential. With a vast population of 750 million residents and a legal framework that’s progressively evolving, Europe is on the cusp of a major growth in its own cannabis industry, potentially surpassing the strides made in the U.S.  

Shifts and challenges 

North Macedonia is working to position itself as the main exporter of medicinal cannabis in the region, legalising the substance for medicinal use in 2016. Even legalisation of recreational use wasn’t off the table, according to the country’s Prime Minister at the time, Zoran Zaev, who promised to transform the country into an “Amsterdam in the Balkans.” But the COVID pandemic and subsequent criticism by the opposition and calls for investigations into Zaev’s personal interest in the industry, after one of his relatives was found to have obtained a growing license, seem to have put a stop on North Macedonia’s ‘green’ ambitions. 

Bojana Paneva, a senior associate at the Karanovic & Partners, a law firm specialising in Southeast Europe, noted that the country saw several legislative shifts on legalising the substance, especially with a key draft law brought before the parliament in 2019, which was expected to be adopted in early 2020. 

“The adoption of the draft law was postponed due to the COVID-19 pandemic, as well as due to certain blockages of the parliament at the time,” she says. In September 2020, the Government proposed a new version of the draft and in December, PM Zaev introduced an ambitious action plan titled “Action 21 – for European standards at home.” The plan outlined 10 major projects and initiatives slated as priorities for 2021, with the economic development of cannabis ranking fifth on the list. 

“At the time, decriminalisation and total legalisation of cannabis were seriously considered, and the Government had a mainly optimistic view on the matter,” she says, adding that the government went on to form a working group dedicated to regulating and utilising cannabis. “The working group had several meetings during 2021, where the terms ‘decriminalization,’ ‘legalisation’ and ‘depenalisation’ were defined, and the Canadian experiences on the medical and personal use of cannabis were discussed.” 

In 2018, Canada legalised cannabis, a move that significantly boosted its stature in the medical cannabis industry. This decision has led to a substantial economic impact, contributing USD 43 billion to Canada’s GDP and creating 151,000 jobs from 2018 to 2021. Cannabis retail outlets have become a common sight in prime Canadian locales. Major players based in Alberta and Ontario have also taken their medical cannabis operations to the European market. 

Stalled progress 

Paneva informs us that as of March 2021, the draft law on cannabis in North Macedonia was revoked, and there have been no further developments as of 2023. The government had ambitious plans from 2022 to 2024 to establish a comprehensive system for cannabis management and to leverage its various benefits, but those are yet to materialise. One of the crucial aspects of the agenda for the cannabis industry, establishing a special agency for cannabis for Medical and Scientific Purposes, tasked with overseeing the cultivation and production of cannabis for significant applications, remains an idea. 

Paneva points out that the stagnation in legal reforms has had a detrimental effect on the industry. Companies holding licenses to grow cannabis are caught in a legal grey area, especially regarding the export of dried cannabis flowers. There’s confusion about whether they’re allowed to export or not. Local companies have been seeking clarity from the Assembly of North Macedonia on the issue, yet, as of 2023, “no such authentic interpretation has been provided.”  

Budding prospects 

Despite regulatory hurdles, RHpharma has managed to carve out a successful production network. A quick perusal of their website reveals the company’s guiding philosophy. Front and center in their product showcase section, where they present an array of cannabis extracts with various CBD dosages, is the evocative quote by Oscar Wilde: “Health is the first duty in life.” 

Emilija Gacovski, deputy head of production, pointed out the favourable conditions for business in North Macedonia. “The cost of labour here is more affordable compared to other Balkan countries, and this applies to both highly educated professionals and workers with lower levels of education.” She adds that setting up a business in the country is easy. “For instance, while obtaining a building permit in Greece might take over two years, including all the necessary bureaucratic procedures, in Macedonia, these processes can be wrapped up in just 6 to 9 months.” 

But, Gacovski points out, there are challenges when it comes to obtaining permits for the medicinal cannabis production. She notes the industry’s relative infancy in Europe, particularly in contrast to other regions where distinct regulatory bodies oversee cannabis. In Macedonia, the responsibility falls to the Agency for Medicines (MALMED), which issues permits for medicinal cannabis extract. The process for cultivating medicinal cannabis flower is even more complex, requiring approvals from multiple entities, including the Ministry of Health, Ministry of Agriculture, and MALMED. 

She suggests “it would be necessary to set up a separate, autonomous agency for cannabis that would offer professional oversight, inspection and regulation in this field.” 

Companies in Macedonia have appealed to the government multiple times to establish a dedicated agency, arguing it is crucial for the industry’s regulation and growth. The law, however, has not been changed for over a decade. 

Despite these difficulties, Gacovski’s outlook remains positive. “Our focus now is on the German market, which is, according to global statistics, the largest consumer of medical cannabis flower,” she says. This strategic move is supported by the company’s thorough work in securing all the necessary permits and achieving quality certifications, particularly the coveted German GMP Certification.  

While she acknowledges that the demand for medical cannabis extracts isn’t as robust at the moment, she believes that “once the benefits of cannabis extracts are more widely recognised, we anticipate a growing demand for these products.” 

“The private sector possesses the power to mobilise much-needed investments,” emphasised the Slovenian Minister of Economy Matjaž Han, setting a tone at the onset of the event Rebuild Ukraine: Opportunities for Slovenian Business. Held at the Hotel Kompas in Kranjska Gora on March 22, the conference was organised by SPIRIT Slovenia, the Embassy of Ukraine in Slovenia, and the Institute for Strategic Solutions (ISR), with the aim to encourage joint efforts towards rebuilding Ukraine whih has been devstated by the conflict with Russia.

Echoing the minister’s sentiment, Tomaž Mencin, coordinator for Ukraine’s reconstruction at Slovenia’s Ministry of Foreign Affairs, added: “The idea of rebuilding and reconstructing Ukraine is based on stimulating the private sector.” The urgency to get involved was underscored by speakers at the event, as Anatolii Komirnyi, Ukraine’s Deputy Minister of Infrastructure, revealed that nearly the country’s critical infrastructure has been destroyed by the war.

Despite the onging conflict, Roland Žel, Director of the Directorate for Defence Policy at the Slovenian Ministry of Defence, stressed the urgency of starting reconstruction efforts promptly. “We must start reconstruction now, as this is important for the European economy and therefore for the Slovenian economy,” he stated.

Mitigating the risks of doing buisness in a war-torn country, Gašper Jež, an expert in direct financing at SID Bank, assured participants of support for Slovenian companies in insurance, risk management, and international transactions. “Slovenian companies are well-positioned to secure a majority share of contracts if they seize the opportunity to assist in the reconstruction,” Jež emphasized.

The European Union will also contribute substantially to Ukraine’s reconstruction, assured Nataša Goršek Mencin, Deputy Head of the Representation of the European Commission in Slovenia, presenting a plan worth EUR 50 billion for the period 2024-2027.

At a roundtable discussion, moderated by Tine Kračun, director of ISR, participants from the Slovenian companies that are already operating in Ukraine, explored the prospects of collaboration and investment in Ukraine’s reconstruction efforts.

Representatives from Nazovni Tech, a non-governmental organization working closely with Ukraine’s Ministry of Foreign Affairs, explained their mission to integrate scientific expertise and public initiatives for Ukraine’s recovery. “We are a non-governmental organization, a platform for recovery. Our mission is incorporating scientific expertise and public advancements, public initiatives and coordinating government action to explore more social science in recovery of Ukraine,” they stated. Emphasizing their role in project assessment, they highlighted their commitment to facilitating the adaptation and implementation of relevant techniques and methods.

Riko, engineering company with a 20-year presence in Ukraine, shared their experiences amidst the conflict. Despite challenges, including the loss of a colleague, the company remains committed to Ukraine’s development. They have shifted their focus to environmental and infrastructure projects, aligning with Ukraine’s modernisation goals. “It’s a really huge country with great perspective in green and technological development. So, stay committed, show support, and just try get over the risks with a focus on long-term collaboration,” Katarina Kumelj, project manager at Riko, affirmed.

Duol, a global producer of fast-directed structure support, emphasized the urgency of addressing immediate needs in the country. “For us at the moment top priority is the logistic support to the Ukraine in terms of the temporary accommodation facilities,” emphasized Dušan Olaj, the company’s director and owner. Stressing the importance of staying updated to monitor current situations effectively, he highlighted the need for adaptability in navigating the evolving landscape.

Kontron’s focus is providing support for critical infrastructure, particularly in terms of telecommunications, transportation, railways, and energy. The company, a member of the Austrian group Kontron AG, provides information and communication solutions and has been present in Ukraine since 1995. Robert Kuzmič, director of Kontron, emphasized the significance of revitalising projects but advised businesses to be prepared for challenges in the Ukrainian market. “My message to those who want to do business, don’t expect a 100% advance payment for your product in the Ukraine market. So try to ensure finance and your job is granted, don’t wait too long, and be ready to take the risks for any operation.«

In a year that took the stock market to unprecedented heights, NLB Funds, Slovenia’s premier asset manager, has positioned itself for a promising outlook. Holding a commanding 40% share of the market, NLB Funds reported a significant inflow of €171 million last year, capturing over half of the total across all Slovenian asset managers.

With inflation and economic growth expected to moderate in the first half of the year, there’s an anticipation of a more accommodating monetary policy from both the U.S. Federal Reserve and European Central Bank—contributing to a diminishing fear of recession, with forecasts suggesting that unemployment and inflation rates in 2024 will dip below the figures registered at the end of 2023.

Rok Potočnik, NLB Funds’ senior asset manager, shared an optimistic view on the investment environment. “We’re feeling positive about the prospects for both asset classes this year, though we’re slightly more bullish on stocks than bonds,” he noted. “But, we’re keeping our expectations for the stock market in check, not expecting to see the same high returns we saw last year.”

The firm is proceeding with caution as it maintains a neutral approach in its engagement in both American and European markets. Even with the U.S. economy rebounding in 2023, it continues to be wary of the high valuations of American stocks. Likewise in the EU, influenced by the continent’s proximity to the war in Ukraine and mounting tensions in the Middle East. Huthi strikes on international trade in the Red Sea have led to considerable interruptions in shipping and a spike in expenses, with freight rates between Asia and Europe seeing a more than twofold increase.

Despite identifying some potentially lucrative valuations in Europe—particularly within the luxury goods sector and among defense companies—the complex risk environment and a more guarded economic forecast for the region have led NLB Funds to maintain moderate exposure to European markets.

Asia presents a mixed picture. China, once a favorite for international investors, has seen its attractiveness wane amidst the lifting of COVID restrictions that fell short of expectations, an unfolding property crisis, and heightened tensions with the U.S. over technology imports. The Biden administration has maintained the trade tariffs introduced by former President Trump, who initiated a trade war with Beijing in 2018. Under Biden’s presidency, the U.S. has tightened restrictions on China’s access to advanced American technologies, curbed investments in Chinese sectors deemed strategically sensitive, and expanded sanctions against major Chinese corporations.

Western-aligned countries stand to gain in the region, with India emerging as a significant investment destination, likened by Potočnik to China’s position at the turn of the century. While the IMF projects global growth to linger around 3%, the Indian economy is booming. Delhi projects a 7.3% growth rate for the fiscal year ending in March—the highest among G20 nations—and economists are optimistic about the country maintaining a growth rate of 6% or higher over the decade.

“Japan merits attention as well,” he adds, “as it appears to be on a trajectory of mature economic expansion and moderate inflation after years of sluggish growth and minimal inflation.” The country’s export-driven economy gains from a depreciating yen, which has developed a symbiotic relationship with the Nikkei 225. The benchmark index reached a peak on Tuesday, climbing 2.9% and briefly surpassing 38,000—a level last witnessed before the onset of Japan’s economic stagnation in the 90s.