(SINGAPORE) Faced with a structural shift in the world economy and an uncertain outlook that may force companies to lay off more workers, Singapore will need new long-term strategies for growth and development.

And to help it chart its new path, an Economic Strategies Committee (ESC) chaired by Finance Minister Tharman Shanmugaratnam will be set up later this year. It will include representatives from both the public and private sectors.

'We have found such exercises very useful,' said Prime Minister Lee Hsien Loong. 'I have personally been involved in several of them over the years, including the ERC (Economic Review Committee set up in 2001) more recently. And we hope that the committee will be able to develop its main recommendations in time for next year's Budget.'

Mr Lee was speaking in Parliament yesterday, the third day of debate on the President's Address, when he unveiled the government's plans to tackle economic transformation and to evolve Singapore's political system. He touched on the possibility of further retrenchments during the rest of the year, due to a lagging productivity level. Although the GDP shrank sharply year-on-year by 10.1 per cent in Q1, unemployment went up only moderately to 3.2 per cent, from 2.5 per cent in Q4.

'That means each worker is doing 10 per cent less work,' said Mr Lee. 'That means employers are still holding on to workers for now, because of Spur, because of Jobs Credit, because of flexi-work and flexi-wage arrangements.'

He noted that new orders received by companies will only see them through the middle of this year. And if demand does not continue, firms will not be able to sustain a shorter workweek or job-sharing indefinitely.

'Eventually, if this situation persists, the companies will have to right-size,' said Mr Lee. 'And the workers have to redeploy into new businesses which have orders, which have better prospects, and where they can become fully productive again.

'From the government's point of view, if we are in that situation, we have to let the companies restructure. We have to let the resources shift, from the businesses which are shrinking to the businesses which are growing, and gear up for the changed new world, rather than wait in vain for the old business to come back.'

While government agencies are keeping a watchful eye on the situation, the ESC will study Singapore's strategies in five areas:

how can it deploy resources to maximum effect?

The questions will require some fresh thinking and creative answers. For instance, while Singapore firms have excelled in certain niche areas like oil rig production and legal services, it needs to think about how it can pursue more niche opportunities or win more projects in emerging markets.

Singapore will need to build a more diverse mix of companies, from MNCs and local firms, to start-ups and established names.

'We need to attract the next tier of global companies, after the Fortune 500 - slightly smaller but, by Singapore standards, still large,' said Mr Lee. 'And they are not quite familiar with Asia. They can invest here because they are comfortable with our business environment, and they see this as a good base to expand in Asia.'

Asian firms internationalising their operations will also be targets. The government is also willing to do more to help local firms grow and become global outfits. However, this cannot be done by simply pouring money into them or creating a 'Temasek II', as suggested by some MPs.

What's needed is a vibrant enterprise ecosystem - marked by strong talent attraction, entrepreneurship, professional management, investments in technology, and distinctive brands.

'So it's not an easy thing to do . . . ,' added Mr Lee. 'It's something we will study and work at.'

The study will include a review of Singapore's R&D drive, in terms of how the programmes may be taken to the next level in order to reap economic payoffs. Also, the ESC will have to consider ways to expand Singapore's limited land, develop new energy sources and reduce its dependency on foreign workers.

While the general tone of his speech was cautious, Mr Lee tempered the mood with the view that the Asian growth story remains intact. And if Singapore goes for targeted, niche areas, 'we can make a living for ourselves'.

'So I'm confident we can develop strategies to pursue global opportunities by enhancing our capabilities and growing our economy, that we can pursue inclusive growth and make the best use of our resources. And that is the way to transform our economy, to continue to prosper and to build a first-class home.'