Lee, in his first policy speech since being sworn in on August 12, yielded to a popular clamour when he announced that maternity leave would be lengthened to three months, from the current two months.

The civil service, one of the city state's biggest employers, would cut its working week by half a day to five days to enhance family life, and parents would be allowed to take a further two days off per year as "child care leave".

Cash incentives for couples will now be extended up to the fourth child, and levies paid to the government for the right to hire a foreign maid will be reduced for families with young kids to ease the burden of child rearing.

Singapore's low birth rate has become an urgent concern after it was revealed that fertility plummeted to a historic low of 1.26 children per woman last year, meaning Singapore's native population is shrinking.

Only 36,000 babies were born last year, well below the 50,000 babies Singapore needs to replenish its population of 3.4 million naturally and have enough manpower for long-term economic, defense and other needs.

"We have always resisted a five-day week... but in fact it is one of the most important things for our young people," Lee said.

"Two days of a weekend is different from one and a half days of a weekend. So after having said no for a very long time, I think it is time to turn this stone over also," he said.

But he stressed that the 44-hour work week for public service workers will remain, spread out over five days.

Aside from the fresh incentives, Lee said a change in attitudes was also critical in solving Singapore's baby shortage, which he described as a "very serious problem."

"This is a matter of values, not of incentives," said the 52-year-old Lee, himself a father of four.

"This package by itself isn't going to solve the problem but if it changes Singaporean mind sets towards marriage, family and children and causes people to think again and reorder their priorities in life, then I think it will contribute to turning the situation around," he said.

After a population control program urging people to "stop at two" children proved too successful in the 1980s, the government put in place a slew of financial and tax incentives to encourage couples to have more children.

A "baby bonus" scheme announced in 2000 gave fresh financial incentives for couples who will have a third child, but this failed to reverse the trend.

Relatively easy abortions and a high divorce rate also contribute to the population problem.

Failure to boost the fertility rate will mean Singapore will have an increasing proportion of elderly people compared to working-age citizens in coming decades, resulting in a heavy welfare burden for the state.

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