KUALA LUMPUR, April 9 (Reuters) - Malaysia said on Wednesday it would keepthis year's duty-free crude palm oil quota at 1.3 million tonnes, while itit expected demand for the exports to rise after the war against Iraqended.Malaysia, the world's largest palm oil producer, imposes an export taxon crude palm oil, or CPO, to protect its refiners and ensure localsupplies. The tax starts at 10 percent on prices above 650 ringgit ($171)a tonne.Primary Industries Minister Lim Keng Yaik, speaking with reporters,confirmed the quota news, which industry sources had revealed earlier onWednesday.Lim said Malaysia looked forward to a speedy end to the war."Then," Lim said, "the demand for palm oil will increase quitesubstantively."So far, he added, the war had not dented exports to Malaysia'sneighbours despite a small rise in transportation and insurance charges."There was not very much effect on the delivery of palm oil toneighbouring countries."Several palm oil traders told Reuters over the weekend more than400,000 tonnes of palm oil-based vegetable ghee and 100,000 tonnes of palmoil were poised to enter Iraq as part of the United Nations oil-for-foodprogramme for Iraq.Traders said Malaysia's palm oil exports were expected to rise tobetween 360,000 and 375,000 tonnes in the first 10 days of April from355,514 tonnes for March 1-10 as reported by cargo surveyor SGS.The minister said the exports quotas were given to plantation companieslocated in the states of Sabah and Sarawak on Borneo island. Traders saidthe quotas were given to seven companies.Lim said the government discouraged the exports of CPO from PeninsularMalaysia because of refineries' overcapacity there."I cannot allow too much crude palm oil to come out from PeninsularMalaysia," he said.The government had so far released 1.2 million tonnes of the quotas andwas retaining the remaining 100,000 tonnes, Lim said.Malaysia produced 11.9 million tonnes of PO in 2002, up from 11.8million tonnes in 2001. This year's production is estimated to total 12million tonnes.Malaysia's palm oil exports are mostly in the form of by-products, suchas RBD palm olein and stearin.