Indonesian companies have joined the Roundtable on Sustainable Palm Oil (RSPO), a WWF-led initiative to engage palm oil companies, and is trying to abide by their principles, he said.
Technology minister Agusman Effendi said that economic factors as well as "sustainability of the environment and the way the government can give extra support to the poor" needed to be considered.
"The `what' has been defined clearly, but the `how to' is the thing that has been criticized by the public," he said.
Companies in Malaysia, the world's largest palm oil producer -- expected to be eclipsed by Indonesia this year -- are being lured here by the vast expanses of already-cleared land.
Malaysian plantations minister Peter Chin insists palm oil production does not damage the environment and said Malaysian companies will boost productivity by replanting with higher yielding clones and adopting good agronomic practice.
"We are committed to ensuring that whatever we do now is not at the expense of the environment and our future generations," he said.
According to the Malaysian Palm Oil Board, 65 percent of Malaysia's total land area of almost 33 million hectares is comprised of forest. Palm oil plantations use 12 percent.
Alvin Tai, plantation analyst at OSK Securities, said most of the companies listed on the Malaysian bourse are expanding in Indonesia as landbank in Malaysia is limited.
He said most major plantation firms were RSPO members and "they have the resources to maintain those standards. It's the smaller plantation owners that are a concern".
Meena Rahman from Friends of the Earth Malaysia disputes the government's claims and says that the group is particularly worried about projects in Sarawak, located on the Malaysian side of Borneo island.
She says there is evidence that 1.5 million hectares of land that was to be set aside for protection and water catchment purposes has been planted with oil palm as well as pulp and wood trees.
"Maybe what Peter Chin is saying is that they are planting palm oil in areas that have already been logged -- but they should allow reforestation to take place instead of allowing palm oil expansion," she said.
Malaysia's northern neighbor Thailand is also getting in on the game.
High prices for palm oil, driven by Bangkok's search for alternative fuels, have driven more and more farmers to convert rubber and fruit plantations to grow oil palm, an official from Thailand's agriculture ministry said.
Local prices of palm oil have almost doubled to more than 4 baht (US$0.07) per kilogram from 2 baht last year.
Last year Thailand had some 32,000 hectares planted with oil palm, but the area is expected to jump to 81,000 by year end. An additional 400,000 hectares of unused farmland in the south could also be used, the official said.
The government has provided soft loans to help farmers make the switch, and is considering a floor price for the crop, she said, adding that "we don't have environmental issues" linked to palm oil, like Thailand and Malaysia.
The Philippines meanwhile has about 25,000 hectares under cultivation, but some 454,000 hectares of "disposable land" -- pasture or shrubbery -- mostly in the south, has been earmarked as well, the agriculture department said.
But so far, only one Singapore-based company has come sniffing, seeking at least 25,000 hectares of land.
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