"One major challenge to the marine industry is global terrorism," Lee said in a marine industry speech to Jurong Shipyard employees.

"There is growing concern that their next attack may be via ships and shipping containers. This would not only inflict heavy casualties and damage to property, but also disrupt the wheels of international commerce.

"This can potentially cripple international trade, which will have significant downstream effects on many sectors, including the marine industry."

On a more positive theme, Lee said that despite a biting recession last year, Singapore's marine industry grew more than 40 percent as uncertainties in other parts of the world made Southeast Asia an attractive ship repair site.

In the first half of this year, it expanded 13 percent.

"This sterling performance of the marine industry shows that despite an overall economic downturn, there will always be pockets of opportunities, where we can continue to thrive and earn a good living," he said.

Singapore, a Southeast island-republic near the mouth of the busy Malacca Strait, is a key regional port and transhipment hub.

It also accounts for 22 percent of the global ship repair market despite having only 5.0 percent of the world's ship repair facilities, according to Lee.

Lee said another major challenge to Singapore's marine industy was growing competition from China, Southeast Asia's giant neigbhour.

"China has some very efficient and modern shipyards. Over time, their standards will improve and they will be formidable competitors," he said.

But he said Singapore could meet the challenge by expanding beyond the small domestic market, citing Jurong Shipyard's own forays into China and South America.

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