"It is not likely that Indonesia will reimpose the (export) ban," said a palm oil trading manager in Kuala Lumpur. "Even if it reimposed the ban, it won't work. It will be a failure. The ban could only lead to large smuggling." Some Indonesian traders said at least 300,000 to 500,000 tonnes of crude palm oil (CPO) had been smuggled from smaller ports in Sumatra from January to June this year. Indonesia's Harian Ekonomi Neraca newspaper reported on Friday that the government was considering banning export of crude palm oil (CPO) again due to tight supplies.

"We will hold a meeting to discuss plans to stop CPO exports," Indonesian food minister AM Saefuddin was quoted by the paper as saying. "If there is an agreement, it will be brought to the cabinet meeting in first week of August.The decision will be fixed at that time."

On Thursday, a Trade and Industry Ministry official said Indonesia has no plans to ban the export of palm oil or its by-products as it has already imposed export taxes on palm oil.

The export tax on crude palm oil was raised last week to 60 per cent from 40 per cent, crude olein to 60 per cent from 40 per cent, refined, bleached, deodorised (RBD) palm oil and RBD palm olein to 55 per cent from 35 per cent and crude palm kernel oil to 50 per cent from 35 per cent.

The rupiah's weakness has made the export of CPO more attractive than selling in the domestic market, as exporters are paid in dollars.

Exporters said shipments from Indonesia has slowed by 30 to 50 per cent following the higher duties.

"Shipments had already slowed down with the imposition of huge taxes. And what more if they reimposed the ban, there will absolutely be no more shipments at all," one official said.

"Then there will be a flood of oil in the (local) market. What are they going to dowith all the oil," the official said. Indonesian palm olein prices soared as supply fell drastically due to a surge in crude palm oil exports.

The sharp price hike came despite the government's efforts to keep prices as low as 3,500 to 4,000 rupiah a kg at the retail level to limit spiralling cost of commodities.

Industry officials also suggested that Indonesia set export quotas for local producers to stabilise supply in the domestic market.

"It is uncompetitive for them to export as higher tax means higher cost for them. Production in Indonesia is also seen rising," the official said.

The Federation of Indonesian Vegetable Oils and Fats Associations said crude palm oil production was expected to rise by eight percent a year because of an expansion in plantation areas.

It said output in 1998 was projected at 5.61 million tonnes and at 5.84 million tonnes next year.