Government officials have given tentative approval to a plan by Cargill Inc. to build a coconut oil mill in a troubled area of the southern Philippines.

It will mark a significant return to the Philippines by the Minneapolis- based commodity giant, which once ran one of the country's largest processing plants before it was forced out by a monopoly created during the rule of former President Ferdinand Marcos.All existing coconut mills are Philippine-owned except one bought recently by a Singapore company.

The new Cargill plant will be able to process 600 metric tons of copra daily, Felix Berto Lazaro of the Philippine Coconut Authority told The Journal of Commerce.

The government is seeking a proliferation of such mills so farmers can avoid the high costs of transporting copra for processing.

Cargill's project will be worth millions, Mr. Lazaro said Tuesday. Industry analysts estimate construction costs at some 50 million pesos (US$2.5 million).

The site development alone is a tremendous cost. It needs foreign investors, particularly Americans, with full confidence in the Philippines, he said.

Cargill is proposing a site at Cotabato on the southern island of Mindanao.

Mindanao was the site of a bloody rebellion in the 1970s by Moslem extremists and is now considered a prime breeding ground for the communist- inspi red New People's Army, which is waging a guerrilla war against the government in many areas of the nation.

Many in the government and outside believe the key to quelling the current insurrection is to improve living standards among millions living in poverty on the land.

Mr. Lazaro said there have been no protests about granting permission for a new mill to a foreign company.

It will generate income as a 100 percent export-earning venture, he said.

Mr. Lazaro also said unidentified U.S. and Japanese companies are showing interest in non-traditional coconut products such as coir, a fiber from the husk.

It is used as stuffing in car seats and furniture and is longer-lasting than synthetic foam products, he said.

The Philippines is the world's largest coconut producer, with about 70 percent of production, and accounts for at least 65 percent of coconut-produc t exports, for which the United States is the leading customer.

Coconut oil is used primarily in soap products and foods. As an ingredient in processed foods, coconut oil is competitive with other edible oils such as soybean oil, cottonseed oil and palm oil.

With demand for coconut oil falling, the government and industry bodies are casting for substitute exports.

Copra prices jumped 80 percent last year to US$251 a ton from US$139 in 1986, according to figures from the United Coconut Association of the Philippines. Copra meal prices gained about 10 percent to US$99 a ton, it said.

But the higher prices have a down side in declining volume of sales. Copra exports were off 11 percent and copra meal sales down 8 percent, the trade body estimated.