Malaysia is eyeing an aggressive expansion in its production of palm oil by up to 25 percent amid increasing demand for the alternative fuel biodiesel.

Plantation Industries and Commodities Minister Peter Chin Fah Kui said his ministry was aiming to boost the production yield of palm oil from four to five tonnes (4.4 short tons) per hectare (2.47 acres) annually by 2010.

Malaysia will soon launch an economic plan to last from 2006 until 2010.

"We look forward to increasing the yield by another tonne or so to five tonnes. It will be a big achievement," Chin was quoted as saying by the national Bernama news agency.

"With an extra one tonne, we will increase production by 25 percent and this will be a big help to the country's total production," he said.

Chin said increased acreage in Sabah and Sarawak, which are developing their palm oil industries, improved prospects for the industry's expansion.

"Downstream products now are getting more, especially the use of biodiesel," he added.

Bio-fuel act in the works

The government, keen to reduce dependence on fossil fuel, is building three biodiesel plants, each with annual capacity of 60,000 tonnes of biodiesel, at a cost of RM120 million.

Chin has previously said that strong demand for biodiesel from European nations as well as Colombia, India, South Korea and Turkey was fuelling the growth of the industry in Malaysia, as more countries seek to reduce their reliance on oil amid high oil prices.

Malaysia has also begun preparations to change from diesel to bio-fuels by 2008, including drafting a bio-fuel act that will make it mandatory to make the switch.

Malaysia is the world's largest producer of crude palm oil. Output soared to nearly 14 million tonnes in 2004, half the world's production.

It exported 12.5 million tonnes of the oil in 2004, worth some US$8 billion, accounting for 58 percent of global palm oil exports and 27 percent of the global oils and fats trade.