Cyprus has created a framework for a cannabis cultivation industry and it will charge companies a €500,000 ($562,000) licensing fee to commence production.

The Mediterranean island nation legalized marijuana cultivation, exports and imports in February in a 34-18 government member vote. It saw the country’s Drugs and Psychotropic Substances law amended to permit local growers to import seeds and flower to begin cultivation projects.

It has now formed a special coordinating committee that will evaluate applicants for licences before choosing three winners. This trio will be the only firms permitted to grow cannabis in Cyprus for the next 15 years, so the onus is on the committee to select large, experienced global cannabis companies that have long-term potential.

The three firms that are selected will pay an upfront fee of €500,000 and then an annual €30,000 renewal fee, netting the Cypriot government €1.35 million over the next 15 years.

Each producer must submit a quarterly report outlining the safety measures it has adopted, while independent inspectors will monitor them on an ongoing basis. If they fall foul of the authorities, the crops will be destroyed.

Cyprus has a population of 1.2 million and it could have a reasonable domestic market. It legalized cannabis oil by medicinal purposes in January 2017, but only for advanced state cancer patients, and the Feb. 2019 law expanded the range of qualifying conditions.

The Cyprus Ministry of Health has been working with Canadian producer Tilray to import and distribute Tilray Drops, a medical cannabis extract product, at pharmacies and healthcare facilities throughout the country.

Yet the bigger prize could well be exports, as Cyprus is well located for any producer that wants to target Europe and the Middle East. It benefits from favourable growing conditions and labour should not be too expensive, so it could become a significant hub for international producers in the years ahead.

Europe is on course to become the world’s largest market for cannabis sales and it is forecast to hit €58 billion by 2028. Countries like Germany, Italy, and the Netherlands will have increasing demand for marijuana in the future and growers in Cyprus could be well positioned to cater to those markets.

It is estimated that Cyprus will initially produce a minimum of €180 million worth of cannabis per year.