Most traders said they believed CPO exports could reach 25,000 tonnes in March, higher than February's figure estimated at about 20,000 tonnes. Indonesia is the world's second largest producer of cpo after Malaysia.

But traders said further rises in export would be limited by the fact that domestic CPO prices were more attractive than export prices. Instead, refined, bleached, deodorised (RBD), olein has become the favourite export commodity.

"I don't mind saying CPO exports will reach 25,000 tonnes in March. But for me it is not the issue. Smugglers are still making money when local demand is poor during the economic crisis," said one trader in Medan, North Sumatra.

"I think smuggling can reach 30,000 tonnes this month," he said. The trader said Indonesia exported three million tonnes of crude palm oil and itsby-products in calendar 1998.

Indonesia has lowered the base prices of CPO to $430/tonne from $535/tonne in response to falling global prices. The CPO export tax stands at 40 per cent. Traders add the tax to the base price to determine an export price, which also factors in the value of the rupiah, currently hovering at 8,800/8,900.

Officials at Belawan port in Medan, which is the main exit for CPO, said no smuggling had taken place there, but confirmed it could take place at smaller ports in Sumatra.

"Everyone knows that smuggling still takes place. It's been in the press, but the problem is there is a lack of action from the government," said one trader in Jakarta.

Another Jakarta-based trader said exporting olein was more profitable because of the low margin between export and domestic prices of CPO. Export prices were quoted at around 2,700 rupiah/kg while local prices stood at 2,885 rupiah/kg.

"Olein is still more profitable. CPO producers are selling the oil to the industry which will processit into olein. The industry will later sell olein either locally or for exports," he said.

The trader said Indonesia exported 1,00,000 tonnes of RBD olein in February and the amount was expected to be the same in March. He said Indonesia's production is seen at six million tonnes in 1999 against 5.5 million tonnes in 1998.

Trade and Industry Minister Rahardi Ramelan said that the government would reduce the export taxes on CPO and its by-products once it had an idea about the country's output this year.

Ramelan said this year's output could reach as high as eight million tonnes, adding that there were calls for the tax to be lowered to 25 or 30 per cent.

The Harian Ekonomi Neraca newspaper, quoting a figure released by the trade and industry ministry, reported that Indonesia exported 2,36,529 tonnes of CPO from May to December 1998 worth $99.09 million. The country also earned 507.1 billion rupiah through export tax.

It said olein exports stood at 2,16,484 tonnes worth $123.4 million, while earningsfrom export tax were 562.1 billion rupiah. Indonesia banned the CPO export from January through May 1998 because of the rising prices of cooking oil.

The paper, quoting sources at the ministry, said smuggling did take place during the period when CPO export was banned, based on the fact that Indonesian crude palm oil continued to arrive in Rotterdam.