Israel and the Future of Cannabis Exports

Israel has held a position of world renown for entrepreneurship in the past decades- a trend that has only accelerated in recent years. Now, Israel hopes to lead in the export of cannabis products.

Back in late January, 2019, the Israeli cabinet approved a law that allowed the export of cannabis to countries where it is legal to purchase. It was speculated by Israeli media that these exports could begin within nine months. 1 The better part of seven months later, there have been no exports from Israel to date (though there have been imports). 2

The fact that there have been imports and no exports may excite critics of the January law who were concerned that the export law would only increase the acceptance, use, and prevalence of cannabis in society. Certainly, it was on the premise of economic benefit that the law came to be despite some opposition.

Nonetheless, Israel has been an economy accustomed to orienting toward the future. The development of a legal framework to proceed was an instrumental first step. Let’s look at what this means for Israel’s aspiring cannabis export empire.

Considering that Israel is a small, arid country, it may seem unintuitive for Israel to become a major exporter of anything agricultural. Indeed, more than half of the country’s square milage is the Negev desert. About 1/3 of the country receives more than 11 inches of rain annually. That’s the land considered arable.

When cash crops can be grown with high water efficiency, that’s the only real prospect for agricultural export Israel has. Currently, no category of Israeli agricultural export amounts to even 1% of Israel’s exports, with the closes being Fruit Juice and Baked Goods (mostly imported by the United States). Even wine, which Israel has started to promote as a specialty, accounts for only 0.1% of its export market. Most of Israel’s neighbors consume little to no alcohol domestically, and its existing trade partners are extensively provided for.

The reason this matters is that unlike most of the neighboring region, Israel does not have notable amounts of fossil fuels to exploit. As a result, Israel has a very small annual export quantity relative to its size as a global economy. While its tech sector has flourished and its financial sector matured, this leaves economist and policy makers with a severely under-diversified economy overall. Tech and Finance sectors combine for over 72% of Israel’s most popular international Equity Index. By Comparison, the U.S.’s Tech and Finance sectors have a combined 34% share of Equity capitalization.

It makes sense then that Israel would attempt to boost exports of something other regional economies is unwilling or incapable of producing in large quantities. Israel appears poised to supply an oversized share of the global market for cannabis as a solution to lagging agricultural productivity.

With all of the talk of boosting exports of cannabis, what about the domestic market within Israel? Technically, recreational use of marijuana is illegal while medical uses are legal. As of April, 2019, there is new legislation in effect that somewhat decriminalizes personal use of recreational marijuana originally introduced by a Likud Party (Center-Rightwing) Knesset member.

Israel’s history of medical cannabis is extensive, with legalization taking place in the 1990’s for multiple medical applications.

It would be difficult to over-emphasize the amount of research, resources, and investment there has been in recent years into cannabis in Israel. While legal acceptance of recreational use has been slow, the government’s policies and medical community’s enthusiasms have not been.

Research of cannabis began in the 1960’s in Israel. There has been continuous interest from the medical community as well as policy makers. In 2012, the pioneer of Israeli cannabis research Raphael Mechoulam told Israel21c:

“Israel is one of the leading cannibinoid centers of research in the world. There are about two dozen groups working on it and people come from all around the world to see what we do.” 5

What Mechoulam stated then has only become more true, with university programs (i.e. Ariel University), farmers, and physicians advancing research constantly. Tikkun Olam company, one of the leaders in Israel’s cannabis industry, reportedly has developed 230 strains of medical cannabis for therapeutic research.

One asset the nascent cannabis industry in Israel has is extensive agricultural technologies for resource management and conservation. The arid nation could not rely on its immediate neighbors for produce since its foundation, spurring the need for innovation to overcome the lack of land and water within its borders. There are existing tools on the market geared toward the type of production that exporters hope to achieve that minimize water usage (i.e. Israeli irrigation tech firm Netafim). There are also new technologies specifically for cannabis production: Flux’s IoT hydroponic tool and the Leaf home cultivation system. 6 7 8