27/10/2004 Agra Europe - Higher import quotas by China has spurredIndonesia, the world's second largest palm oil producer after Malaysia, tobelieve it can boost exports to the East Asian giant.

China has set its total quotas for imports at 3.168 million tonnes of palmoil and 3.587mt of soya oil in 2005. This year's quota was 2.7mt of palmoil.

"Next year it is hoped Indonesian (palm oil) exports could reach 1.5mt or250 000-300 000t higher," Andrian Supandy, head of the economics sectionat the Indonesian embassy in China, said in Jakarta on the sidelines of apalm oil meeting.

China has increased the amount of low-duty import quotas as it graduallyopens its protected farm sector to global markets.

Indonesia exported 6.5mt of palm oil in 2003, of which around 60% went toIndia.

Potential new areas

Agriculture Minister Bungaran Saragih said palm oil output was estimatedto reach more than 11mt in 2005 by cultivating potential areas.

Saragih also said expansion efforts will be focused on the areas ofKalimantan, Sulawesi and Papua under a newly approved plantation bill thatwould allow firms to cultivate bigger areas.

"By expanding our palm oil plantations, output may exceed Malaysia," hesaid without elaborating. Palm oil plantations currently stood at 4.6million hectares, or up from 2.3m ha in 1999.

Indonesia is projected to yield between 10.5-11mt of palm oil this year ongood weather and better yields, compared with 9.6mt last year.

Eyeing biodiesel market

Meanwhile, Indonesia is exploring the biodiesel market as world palm oildemand stagnates, especially as it plans to double the palm oil area to10m ha over the next thirty years, Saragih said.

"We don't need to be too worried with the palm oil market, because demandwill continue to grow," he said. "We're looking into the use of (turningpalm oil) into biofuel, and when the time comes that would be unlimited."

Analysts have said that sustained high crude oil prices will lead togreater use of more expensive biofuels, but consumers will need moreincentives for demand to take off.

Derom Bangun, chairman of the Indonesian Palm Oil Producers Association,said discussions on biodiesel use between Indonesia, Japan and Germany hadbeen intensive.