Lee said Singapore's port operator PSA Corp. should follow the example of Danish shipping group AP Moeller-Maersk, which recently bid to take over Royal PO Nedlloyd of the Netherlands, to strengthen its bargaining clout.

"They will have the bargaining power to press their claims. PSA has to meet their needs to its best ability," Lee said in the Straits Times newspaper.

He said other shipping lines would respond to the merger by forming similar alliances, sparking a wave of consolidation similar to that of airports and banks.

Lee, now a senior adviser in the government headed by his son Prime Minister Lee Hsien Loong, noted competition had shifted from a "port versus port" basis to one between PSA and a port-shipping line alliance.

"We are in for a very tough time, but I think we can fight this competition and win," said Lee.

Apart from Singapore, state-owned PSA operates container terminals in Europe, India, China, South Korea, Thailand and Brunei.

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