The city state, which is overhauling its export-driven economy to diversify from manufacturing towards knowledge- and services-based sectors, relied on transport and communications for about 14.5 percent of gross domestic product last year.

To keep the world's second-busiest container port relevant against regional rivals as Singapore emerges from recession, the government unveiled plans on Monday to lower charges and raise workers' skills.

"I don't think the government is unduly worried yet -- S$80 million speaks for itself," said Joseph Tan, an economist with Standard Chartered Bank.

Industry sources said the government fund would act like a subsidy for shippers. Transport Minister Yeo Cheow Tong told parliament S$30 million will be set aside to help shippers reduce operating costs and $50 million spent on upgrading skills.

The Maritime and Port Authority said in a statement a 20 percent concession on port dues would be extended for two years and shippers offered incentives to bring in new business.

EXPERTISE GOES NORTH

"If they are taking steps to reduce costs in Singapore, there is no doubt it will be received positively," Morten Engelstoft, managing director of Maersk Sealand International in Singapore, told Reuters.

Denmark's Maersk, the world's biggest shipping line, decided in 2000 to shift its operations from Singapore to the Port of Tanjung Pelepas (PTP) in neighbouring Malaysia after it was offered an equity stake in that facility.

Singapore was dealt another big blow earlier this month when Taiwan's Evergreen Marine Corp decided to follow Maersk's move to PTP.

Chief among the reasons for the Evergreen move was sharply lower charges at the Malaysian port, which industry sources said could be up to half those levied by Singapore's PSA Corp.

Yeo said PSA would continue to review its strategy on how to stay ahead of regional competition by taking steps to anchor its customers for the long term.

In April, PSA's volumes surged because of contributions from Belgian port operator Hesse-Noord Natie (HNN), which were included for the first time. It bought an 80 percent stake in HNN for about 650 million euros.

"The strategy of PSA is fairly clear with the acquisition of the Belgian port," Standard Chartered's Tan.

"They are trying to broaden their earnings base with port management and other expertise. I think they will be looking at other port acquisitions around the world."

PSA also runs ports in China, India, South Korea, Brunei, Italy, Portugal and Yemen.

Government investment vehicle Temasek Holdings has put an earlier plan to float the highly profitable port operator on hold due to competitive pressures and weak global share markets.

VARIOUS OPTIONS

Prime Minister Goh Chok Tong has suggested the government may offer shipping firms a stake in PSA to help Singapore maintain its position as a regional transhipment hub.

"As the PM has mentioned, we will definitely consider other options as well, such as offering dedicated terminals and shareholdings by shipping lines. All these are options," Yeo said in response to questions in parliament.

Maersk, which maintained its regional head office in Singapore, said it had not been approached to discuss the option of taking a stake in the Singapore port.

"It would be a matter of looking at it once details emerge," said Jesper Praestensgaard, Maersk's senior vice president for Asia.

One of the reasons Maersk shifted to PTP was because it could not own its own terminals or control its operations in Singapore.

Evergreen's public relations manager Elysia Chen declined to comment on the government initiative or whether the shipping line would be interested in taking a stake in the port.

Yeo said price was not the end of the story as shippers considered other factors such as service and efficiency.

"It's the total equation that has to be taken into consideration," he said.

PSA was reviewing the equation to make sure it was the most cost-effective port to call at, the minister said.

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