Indonesia is aiming to overtake Malaysia as the world's largest producer of palm oil by 2008, Vice President Jusuf Kalla said today.

"In 2008, our palm oil production should be number one," Kalla was quoted by the official Antara news agency as saying while opening a seminar on the commodity in the resort island of Bali.

He said Indonesia was currently the second largest producer after Malaysia although it had a much larger area for plantations. The two countries account for 85 percent of world production.

"I am certain that (becoming the top producer) will be attained," Kalla said.

To achieve that goal, he said the government was not only allowing new plantation areas but had also launched a revitalisation program for existing plantations.

He said the move was particularly aimed at producing more raw material for the production of bio-fuel.

Kalla the government would provide subsidized low-interest loans to encourage the development of palm oil plantations.

Indonesia produced 13.3 million tonnes of palm oil in 2005 and is aiming for 14 million tonnes this year.

Malaysia is on track to hit a new record of 15.1 million tonnes this year amid strong demand from the global food, bio-diesel and oleochemicals industries.