Industrial Hemp: A Sustainable Opportunity for Developing Economies

Industrial hemp is attracting growing attention as countries look for new ways to strengthen their economies while reducing environmental pressures. The plant can be used in a wide range of industries, from food and textiles to construction, energy and manufacturing.
A recent UNCTAD analysis highlights hemp’s potential as a renewable agricultural resource. The global industrial hemp market was valued at several billion dollars in 2020 and was projected to expand substantially during the following years. For developing economies in particular, the sector could create opportunities for farmers, manufacturers and rural communities.
A versatile crop with environmental advantages
Hemp has been cultivated for centuries and is adaptable to many different growing conditions. Compared with some conventional crops, it can require relatively little water and can provide useful raw material from virtually every part of the plant.
Its applications are extensive. Hemp fibres can be incorporated into textiles, paper, furniture and construction products, while seeds can be processed for food and oils. Other plant material can be used in bio-based fuels, industrial products and personal-care goods.
The crop may also have agricultural benefits. Hemp can be incorporated into crop-rotation systems and has the ability to absorb certain contaminants from soil. Research cited by UNCTAD indicates that subsequent wheat production can benefit from hemp being included in a rotation.
Because the plant has multiple potential uses, processing it efficiently could reduce the amount of agricultural material that ends up as waste.
Trade remains relatively small
Despite its potential, international trade in industrial hemp remains limited. Around 40 countries were producing raw or partly processed hemp in 2019, with global production estimated at roughly 275,000 tonnes. A small number of producers accounted for most of the world's output, with China, France, Canada and the United States among the leading producers.
International trade was worth only about $42 million at the time. That figure does not necessarily reflect the industry's full size, because trade classifications do not capture every hemp-derived product.
Regulation is another important factor. Industrial hemp belongs to the same plant family as cannabis, creating legal and regulatory complications in some markets. Although industrial hemp varieties are cultivated for their very low levels of intoxicating compounds, legislation does not always make a sufficiently clear distinction.
Establishing consistent definitions and regulations could therefore be an important first step in enabling responsible investment and international trade.
Potential for developing countries
Hemp could provide developing economies with opportunities to diversify agriculture and create additional value beyond the farm.
The plant's possible uses span numerous sectors, including textiles, food and beverages, automotive components, furniture, packaging, paper, construction and personal care. Developing local processing industries could allow countries to capture more of this value instead of exporting agricultural commodities in an unprocessed form.
Hemp's adaptability may also make it suitable for regions where certain conventional crops are difficult to grow. Developing supply chains around the crop could generate employment in cultivation, processing, manufacturing and distribution, particularly in rural areas.
A whole-plant approach could be especially valuable. Instead of treating stems, seeds, leaves and other parts as waste, businesses could develop separate markets for different components, increasing the economic return from each harvest.
Regulation and standards are essential
Hemp's potential does not mean that simply increasing production will automatically create successful industries. Governments and businesses need to consider regulations in both domestic and export markets before investing heavily in cultivation and processing.
Clear rules distinguishing industrial hemp from intoxicating cannabis would reduce uncertainty for producers and traders. Quality standards would also help businesses meet international requirements and build confidence among consumers.
Better trade data would be useful as well. More comprehensive classifications for hemp products could give governments and businesses a clearer picture of the industry's size and development.
Building sustainable hemp industries
UNCTAD's analysis points toward several measures that could help developing countries make better use of hemp's economic potential:
Establish clear legal definitions for industrial hemp and distinguish it from cannabis intended for intoxicating use.
Examine regulations in potential export destinations before developing production for international markets.
Encourage cooperation between neighbouring countries to create efficient regional supply chains.
Build production networks involving farmers, processors and manufacturers rather than focusing solely on cultivation.
Introduce appropriate quality standards for both domestic and international markets.
Improve international trade classifications so that important hemp products, including seeds and oils, are properly recorded.
Industrial hemp is not a universal solution to the economic and environmental challenges facing developing countries. However, its broad range of applications and potential for producing multiple sources of value from a single crop make it an interesting option for countries seeking to diversify agriculture and develop more sustainable rural industries.
With appropriate regulation, investment, processing capacity and market access, hemp could become one component of broader efforts to build renewable, locally rooted value chains.