KUALA LUMPUR, Sept 30 (Bernama) -- Minister of Plantation Industries andCommodities, Datuk Peter Chin Fah Kui, said Thursday that he has approvedadditional duty free Crude Palm Oil (CPO) for export this year.

"Our concept of CPO duty free export is very simple, first, we cater forlocal needs, if there are excess stocks that local refinery plants cannottake in, then we will allow companies which have the capability andcontract to export them. We will agree to go beyond the stipulated 10percent," he said.

He was speaking to reporters after officiating the Oil and FatsInternational Congress 2004 (OFIC 2004). The Congress is organised byMalaysian Palm Oil Scientist' technologist' Association (MOSTA).

However, Chin declined to elaborate further on the additional amount hehad approved.

Malaysia's palm oil production is expected to increase by 0.7 percent to13.45 million tonnes from 13.36 million tonnes last year.

Asked whether Malaysia, the world's largest palm oil producer, will widenthe percentage of duty-free CPO for export in 2005, he said that it woulddepend on the situation as there were two more refineries coming on streamin Sabah and Sarawak.

"There is a need to supply to them. It would also depend on whether or notMalaysian companies, which are setting up refineries overseas, would needthe CPO. We will look into that (increasing duty-free CPO for export)," hesaid.

As for the bearish outlook of CPO prices, he said that the industry hasalways been subjected to the fundamentals of supply and demand.

Hence, when there is more supply, prices would go down and when there isenough demand and the stock is not that much prices will increase.

"It looks like September production is better then expected, naturally itmay be reflected in the price," he said.

However, Chin said that the ministry would ensure that the CPO prices stayat a stable level, "that's my prime objective, it does not matter whetherit is going to be at RM1,300, RM1,400 or RM1,500 per tonne."

Private forecaster Ivon Wong has estimated palm oil production at 1.42million tonnes in September, up from 1.32 million in August, whileend-month stock at 1.4 million tonnes compared with 1.32 million tonnespreviously.

Earlier Chin in his speech, said that given the cyclical nature ofcommodity prices, the industry should vigorously explore and diversifyinto businesses where the returns are lucrative even when commodity pricesare low.

"We must continuously add value to our core product. We must also gofurther downstream to produce consumer value-added products," he said.

He said that with the advantage of readily available raw materials,technology, skilled and semi-skilled workforce and sound economic andfinancial structure, Malaysia has now become a major producer ofoleochemicals in the world.

"But I would like to see further push by our oleochemicals industry intomore value-addition, to change our oleochemicals into high-end consumerproducts such as personal care products, cosmetics and pharmaceuticals."

On the export markets, Chin said that China has overtaken India asMalaysia's major export market, while Europe has been neck-to-neck withIndia.

Last year, he said that exports to China stood at 2.3 million tonnes ofCPO, 2.6 million (in 2004) and three million next year, while India took1.6 million tonnes last year and Europe absorbed about 1.7 million tonnesof CPO in 2003.

"We would like to promote growth in our traditional market. We expect toexport more to China as under the World Trade Organisation (from 2006onwards) there will not be any quota system in China," he said.

He also said that Malaysia would continue to explore ways to cooperatewith India, especially via-a-vis tariff situation and how the volume oftrade between the two countries could be increased.

Chin is visiting India soon.

-- BERNAMA