(AFP) Government will scrap a five percent export duty on semi-processed palm oil products next month to boost exports and keep prices steady, the minister announced today.

Malaysia, the world's biggest palm oil producer, which imposed the duty in 1998 to ensure crude palm oil was processed in the country, would abolish it on September 1, Primary Industries minister Lim Keng Yaik said.

He told a news conference on the sidelines of an international palm oil meeting attended by 1,400 participants he hoped Malaysian exporters would seize the opportunity to compete in markets such as Bangladesh and Pakistan.

Products that qualify include crude palm olein, bleached palm oil, refined or neutralised palm oil, bleached palm olein or neutralised bleached palm oil.

Malaysia, which last year produced 10.8 million tonnes of palm oil, exports about 250,000-300,000 tonnes of semi-processed palm oil products a year.

Producers hailed the announcement, describing it as a positive move that would spur exports and keep prices firm.

Lee Oi Hian, chairman of the Malaysian Palm Oil Promotion Council told AFP that the decision would have a positive impact on the industry.

"As we export more, stocks will be reduced in tandem with the government policy to lower stocks," he said.

Malaysia watched with dismay as the price of palm oil plunged from a high of 2,377 ringgit (626 dollars) a tonne in 1998 to around 800 ringgit in mid-July.

But prices have now bounced back to the 1,200 ringgit per tonne level.

Prices remain firm

Lim predicted that palm oil oil prices would remain firm until the year end due to bad weather conditions in countries such as China and India, and in the United States which is a soyabean oil exporting giant.

Asked what price he would prefer to see, the minister said: "Let the market find its own level. It should not be below 200 dollars and not more than 700 dollars."

Lim also extended an olive branch to rival soyabean-oil exporters.

"The world is big enough for all of us. We should be allies and not try to kill each other," he said earlier in his speech at the opening of the four-day conference.

Lim also said that Malaysian exporters were adhering to the call in July to sell forward as far as possible to cash in on the sharp rise in palm oil prices.

"They are selling as far as six months ahead," he said.

Lim also said the registration for a replanting scheme has been extended to aim for a target of 200,000 hectares.

The government's replanting program is aimed at lowering production by 600,000 tonnes to firm prices. The original deadline for registration was July.

Under a programme to encourage the replanting of trees which are more than 25 years old, the government is providing a loan of 6,000 ringgit per hectare (2.47 acres) and a one-off 1,000 ringgit grant a hectare to smallholders and plantations.