Motivations for partnering with foreign investors
All local cannabis industry KIs (i.e., 6 businesses cumulatively holding 15 licenses at the time of interviewing) reported partnerships with overseas cannabis firms and pharmaceutical companies, primarily from Canada, but also from Europe and the US. Local industry KIs and public official KIs saw foreign direct investment as an essential source of capital to finance the start-up costs of medicinal cannabis businesses. Some industry KIs described unsuccessful efforts to attract domestic investors (e.g., KIs 16, 18, 19, industry) therefore illustrating some preference for local investment. Securing domestic partnerships, however, proved challenging due to Jamaican banks’ refusal to service the cannabis sector (in order to protect banking relationships with banks in the U.S., where cannabis remains prohibited at the federal level). Consequently, Jamaican cannabis entrepreneurs expressed a sentiment that they had ‘no choice’ but to partner with overseas companies in order to secure the necessary capital to meet the requirements of security and surveillance infrastructure:
I had to partner with [country], right? I didn’t have the money for myself. And I decided I am not going to be left out of this industry so if it means that I am going to partner with some white Canadian or some White Americans, I am going to make sure that I have a foot in the niche. (KI10, industry).
We have held in this very space three different investor sessions with people in Jamaica who have money. (…) You try to get an investor locally when they’re risking their solvency, when they’re risking their ability to trade, that’s not gonna to happen... (KI19, industry).
Criteria for choosing international investors
While the extent of financial investment was key in deciding what foreign company to partner with, consistency between the foreign investor’s mission and the domestic entrepreneur’s vision was also considered important. For example, the quotes below illustrate how some domestic cannabis entrepreneurs expressed a preference for investors with a track record of organic cultivation and dedication to the medical segment of the cannabis market:
It’s a business and the purpose of a business is to make profit, but there also must be a commitment to the development of medicine for the humanity. And I am convinced that we have a mix of both. I have been approached by partners whose only purpose is to maximise profit and I have walked away. (KI8, industry).
[Company name] was one that stood out, because of the fact that they were the only organic company pushing for the organic side of things and we were on that same path as well. That was one of the major things that stood out, that was an attraction for us. (KI15, industry).
The benefits of partnering with foreign investors extended beyond solely monetary support and included factors such as the investor’s brand reputation and the size of potential export market, where Jamaican suppliers hoped to take advantage of the distribution systems already established by foreign investors. As illustrated in the quote below, this reflects local industry KIs’ perception that large cannabis players, with an internationally recognised brand and reputation, will provide the cost advantages necessary to remain competitive in the emerging global cannabis sector:
They [investors’ trade name] were doing more capital raises so it was all over the news that you know [investor’s name] raises x amount of hundreds of millions, so it was very much promoted, their name was promoted in the media so it was an easy sell, you know, to any stakeholder here. (…) it was in [year] I got to really test [investor’s name] products but before that it was just that they were one of the most cash-rich cannabis companies in the world. (KI14, industry).
The benefits and gaps in the knowledge spillover and technology transfer
Asked about other benefits of overseas investment, civil servants and domestic industry KIs cited transfer of technological and market knowledge. Foreign investors have provided Jamaican entrepreneurs with access to cultivation technologies and business knowledge that increased the efficiency of cannabis sector in Jamaica. Key knowledge and technology transfer included developing the scalability of cannabis production and the implementation of efficient seed-to-sale monitoring and cannabis processing systems (e.g., extraction technologies and drying techniques). Domestic cannabis entrepreneurs stressed the positive impact of this technology transfer on the quality of their cannabis products:
Had we not had foreign partners we would still be using a smaller extraction system, [but] owning it 100%. And we would be patting ourselves on the back ‘oh, we own this 100%’. We would be probably able to process 10 pounds a day [now can process 100–150 pounds a day] and the quality … right? We have taken [cannabis] oil for experiment from other people who say they have good oil, and when we finished processing it, we have removed a lot of carbon, chlorophyll and made a refined product. (KI9, industry).
I will admit especially the drying techniques that we’ve learned [from them] - are very, very important to having better quality flowers. (KI14, industry).
Despite these reported technological and knowledge transfers, many KIs from academia and the government sector expressed concern over the limited investment in research and development (R&D), which would contribute to the development of value-added medicinal cannabis products. KIs referred to the “limited domestic [research] capabilities” (KI22, politician) such as laboratories and research equipment, where they thought more investment should be directed in the early stage of the regime, as argued in the following quote:
What you want is more strategic investment. You want business that is going to do the R&D, do the research, do the clinical trials, that is also going to help other sectors like medical tourism, wellness tourism, things like that. That is what you want. And then you want investment that is going to give you the ability to do value-added product. So you are not just growing the plant, you are manufacturing medicines locally. You want some of that strategic investment as well. So far that is a little bit disappointing. (KI5, civil servant).
Perceived impact of foreign investment on public health
Two polar perspectives on the potential health impacts of foreign investment in the sector featured in the interviews. On one hand, many KIs from across private and public sectors stressed investors’ contribution to facilitating access to quality-assured cannabis products for therapeutic use. KIs with this view positioned the industry within the pharmaceutical and medical paradigm with medical patients and consumers being the primary beneficiaries of the reform (e.g. KI11, academic; KI18, industry). On the other hand, a couple of KIs with professional background in addiction and public health, considered that the presence of foreign investors exacerbates the challenges to the DDAA posed by the commercialisation of the medicinal cannabis sector (e.g. the extent of direct-to-consumer advertising, which is currently not regulated under the DDAA framework). For example, one KI said that “by having all of this international investment coming in, you are fuelling the expansion of the amendment that is already poorly implemented” (KI-1), reflecting on issues such as the marketing, insufficient medical oversight and the wider threat of the regime transitioning to “recreational” market model.
Risks of “predatory” shareholder agreements
Despite the “substantial ownership” rule requiring that at least 50% of the shareholding and directorship needs to be held by domestic operators, some local entrepreneurs and civil servant KIs observed that international investors are able to exert influence over local companies, for example via strategic structuring of shareholder agreements. Local cannabis entrepreneurs gave examples of what they considered ‘predatory’ practices, e.g.: international investors obliging local businesses to not raise capital outside of the foreign partnership, or applying pressure to adopt cultivation and processing practices that local KIs considered not conducive to the Jamaican context. The latter included investors insisting on cultivating foreign cannabis strains and building expensive temperature-controlled facilities that local actors considered unnecessary in the Jamaican tropical climate. One domestic cannabis entrepreneur described a deterioration of their relationship with an overseas partner following the investor’s pressure to change the distribution strategy:
About [year] they started to indicate that they weren’t interested in importing anything from Jamaica but they were more interested in, you know, satisfying the local market in Jamaica, which was not why we got into business [with them], I would not have done a deal with them had we known that export was not the primary goal. (KI14, industry).
Contracting legal expertise from the foreign investor’s home country was one strategy reported by local cannabis entrepreneurs to protect their own business interests, including for the scenario of dissolving a partnership. The potential for disagreements between local and international firms was also recognised by KIs from academia and the public sector, who expressed concern over the perceived imbalance of power between the two actors:
I am worried in a certain aspect of the level of influence that foreign investors will impose on the local industry. The local players have to be strong and they have to understand that there is something that you have that attracted the foreign investors to your space. (KI5, civil servant).
Protecting Jamaica’s heritage and “landrace strains”
Many KIs from academia, civil society and the public sector expressed concern that foreign investors may threaten the genetic diversity of Jamaican sativa-dominant strains, which have adapted to growing in the island’s tropical climate. KIs observed that a significant part of the legal cultivation space in Jamaica is being dominated by foreign, more potent THC cannabis strains popular in North America (e.g. Girl Scout Cookies, OG Kush, Jack Herrer). There was also concern that investors focused on medical cannabis exports would pressure local firms to cultivate high-CBD cannabis varieties, resulting in the ‘squeezing out’ of heirloom strains from the market. In this context, local industry KIs also opposed the anticipated introduction of regulations for hemp (the draft is being considered as of mid-2020), due to the perceived threat of cross-pollination with ganja (cannabis) (e.g., KI9, 16, 19, industry), for example:
Hemp is a potential threat, it’s difficult … because the investors come in to plant hemp and they are not able to control that … they can wipe out our strains and that can put us into a big problem. (KI9, industry).
[Hemp farms] are the possible source of the contamination … that can possibly happen if you are not doing the right things. (…) In my opinion, and this is my humble opinion, for the space that we are as a country … it’s one versus the other, there’s going be a “hemporium” oil refinery-based country where, we’re growing hemp everywhere or we’re growing boutique cannabis and go with the [Jamaican] brand. (KI16, industry).
The latter quote illustrates local actors’ view that cannabis strains are part of Jamaica’s cultural heritage, and the need to “put measures in place to protect landraces” (e.g. K11, academic). While some domestic companies have entered into intellectual property agreements with foreign investors, this has proved challenging to some operators. One KI described how “a local licensee [was approached by] an international person who offered to buy his strain but he could never grow that strain again” (KI2, activist). While the details of this account are unverified, the quote illustrates KI’s concern over local actors’ ability to protect their interests. One KI went as far as to describe the threat as “piggy backing on brand Jamaica” (KI20, academic).
The risks of political interference
Foreign investors’ economic power, while highly sought-after by domestic cannabis entrepreneurs, was also recognised as a potential risk factor for domestic political interference. For example, a couple of local cannabis entrepreneurs expressed the view that “the promise of prosperity” gives investors a lot of political bargaining power, particularly in the context of “underfunded government” in Jamaica (KI14, industry). KIs from the public sector and academia were also concerned over investors’ access to domestic policy elites and the pressure to develop and apply regulations in their favour. Two quotes below illustrate how they viewed the risk of corruption in this environment:
What they will do, some investors come into the country, they will indicate that they have a lot of money. They will need to apply [for a license] but they do not want to wait the time so they will also go to the Minister and complain and say that “the [CLA] staff is not doing …” but then they [Ministry] check the records and find the staff are following the rules. But sometimes they [investors] don’t really want to wait. (civil servant).
If I allow you to do certain things that are outside of the scope of regulation, it’s corruption. Corruption doesn’t necessarily mean that I have to take money from you, it means that I appear blind eye, I am seeing you breaking the law but I turn a blind eye - that’s also corruption. (KI15, academic).
Foreign investor’s bargaining power with political and government agency elites may benefit domestic cannabis businesses when the interests of domestic and foreign businesses are aligned, but may be a disadvantage when commercial interests diverge, as in the above case of facilitating the hemp sector. This adds to the complexity of relationships between the government, domestic cannabis businesses and overseas investors. One civil servant KI described how the domestic business community, rather than overseas investors, lobbied for lowering the 50% ‘majority ownership’ requirement for licensed cannabis operators, a change that in the long-term is likely to benefit foreign investors:
[There is a] constant pushback to tell the politicians to get rid of it, it has caused a lot of upset in the business community, so much so that you won’t have 51% for [future] hemp [regulations], it will be something far lower. Because there is significant pushback from the business community that, you know, they have to get money, to get into the research …, they can’t get 51% Jamaican ownership and you have to let a lot of foreigners, foreign money come in. (KI17, civil servant).
Perceived impact on the inclusion of local farmers
Most KIs from academia, civil sector and public agencies viewed the opening of the domestic cannabis market to foreign investors as a potential opportunity to facilitate the transition of illegal cannabis farmers into the legal cannabis economy, primarily via financing of essential start-up infrastructure. However, the KIs recognised that achieving this objective depends on finding “responsible investors” with “commitment” to helping disadvantaged communities (e.g., KI20, academia).
When asked to reflect on the extent to which this has been achieved, KIs’ assessments ranged from “a work in progress” (KI20, academia) to a clear disappointment, with descriptions of local farmers being “side lined” by investors (e.g., KI7, civil servant) and KIs “worried about [local farmers] being squeezed out of the market” (K11, academic). One civil servant described how a highly anticipated partnership between an overseas company and a collective of local farmers “fell apart”, with the imbalance of economic power being the key reason:
Now that I’m thinking … you know, think of life … It is the ‘big pocket’ man who gets the show. So if you do something for the big pocket man, you are going to get the headlines, if you are doing something for the little man on the farm, you are not going to get the headlines... (KI17, civil servant).
In the context of the inherent vulnerability of illegal subsistence cannabis farmers, some KIs expressed the sentiment that the government should create a policy environment that supports the inclusion of small-scale growers into the legal market, thus arguing for a “more protectionist approach” (KI14, industry). KIs’ ideas included supporting a domestic cannabis farming sector via domestic government agricultural funding rather than foreign investment (e.g., KI21, politician, KI20, academic), and legal protections for domestic farmers, such as setting a minimum proportion of cannabis output that has to come from small-scale domestic farmers and setting a minimum purchase price paid by processors (KI12, civil servant):
There are many interests to be protected: our strains, ensure [our] farmers are entering to agreements that they can be comfortable with. (…) There’s a question: do you want to set a minimum price that the ganja [cannabis] should be sold [from collective farmers to wholesale buyers]. There should be some regional standards, there should be some regional acceptance that if investors come, they do so on a fair-trade basis. (KI12, civil servant).