Lebanon follows McKinsey advice and legalises cannabis farming

23 October 2020 Consultancy-me.com

Two years after a McKinsey & Company report laid out the benefits, Lebanon has legalised cannabis farming for industrial and medicinal use in a bid to earn much-needed revenue.

McKinsey & Company handed the Lebanese government a 1,000-page report back in 2018, which gave the country’s politicians a detailed view on the country’s state of the economy. The report also outlined dozens of steps which Lebanon could take to boost its economy, with legalising cannabis farming one of the suggestions put forward. According to McKinsey, this could eventually deliver $1 billion in economic value.

At a time when the country is among the most indebted markets globally, the government has decided to now bring McKinsey’s advice to life, driven by the need to raise funds. The parliament has legalised cannabis farming for medicinal and industrial use, with the specific objective of exporting the crop to foreign markets.

Lebanon follows McKinsey advice and legalises cannabis farming

Cannabis has been grown illegitimately in Lebanon’s Bekaa Valley for years now, and Lebanese Agricultural Minister Abbas Mortada believes that this is value that should be better exploited and monetised to the benefit of the Lebanese people. “The Bekaa Valley is considered one of the best lands for cultivating cannabis, which is classified among the finest species in the world, and it does not contain more than 1% of narcotic substance,” said Mortada to Asharq-Al-Awsat.

Explaining the economics of the move, particularly the decision to industrialise the cannabis farming process, he said: “If we sell a kilo for $50, we would support the Lebanese farmers and secure a great return for the state; but if we go towards establishing factories and pharmaceutical plants, then the profits will double, in addition to the possibility that this law would push foreign companies to invest in Lebanon with the aim of manufacturing drugs.”

The decision to industrialise is reflective of the broader attitude towards the legalisation move, which is “really driven by economic motives, nothing else,” according to MP Alain Aoun of the Strong Lebanon bloc who spoke to Reuters. This is not the first time that legalisation has been brought to the table in Lebanon, and Aoun reports that the move is still accompanied with “moral and social reservations.”

Time of crisis

That being said, the more investment the better at the moment, for a country that has been in a protracted economic crisis for a number of years now. In the same report that McKinsey & Company put forward the legalisation drive, the global strategic consultancy highlighted the extent of economic woes in Lebanon.

Between 2006 and 2010, Lebanon’s real GDP growth amounted to well over 90%. In seven years to follow, this figure had fallen to just over 1%. What has thrown Lebanon into the spotlight, however, is its seemingly insurmountable mountain of debt. The debt-to-GDP ratio at the time of McKinsey’s report was approximately 150%.

A rescue plan has been in the making for years but has failed to arrive. The desperate economy turned to the International Monetary Fund (IMF) for a $10 billion loan in May this year as a last resort, as the Covid-19 crisis compounded what is among the worst financial crises in the country’s history.

The latest move to legalise cannabis is an attempt to raise another billion or more in revenues. Merchants selling the crop illegitimately already reportedly make more than $2 billion from sales, with Lebanon currently ranking as the third largest exporter of hashish in the world according to the United Nations Office on Drugs and Crime.