SINGAPORE -- Port operator PSA Corp.'s decision to drastically slash jobs in an industry at the core of Singapore's trade-driven economy has underscored the stiff competition confronting the island, economists say.

Singapore overcame its lack of resources by being more efficient than its neighbors but this is no longer seen as a sure recipe for success as shocked port workers braced for the industry's first mass layoffs in over 20 years.

Analysts said Singapore has to seek ways to trim the cost of doing business now that other countries in the region are capable of doing the same tasks at lesser expense.

"It's a high-income economy. Singapore has to become knowledge-intensive," said Yuwa Hedrick-wong, an economic advisor to global credit card giant Mastercard International.

"A lot of jobs lost will never come back. I look at the profile of the unemployed and they are typically 40 years and over with high school education or below," said Hedrick-wong.

"There's a mismatch and that is affecting Singapore. The challenge in the short term is the job mismatch," he said.

State-linked PSA Corp.'s decision to cut 800 jobs by March, about 13 percent of the work force of 6,000, was the latest confirmation of the fierce challenge Singapore is facing from its neighbors, particularly Malaysia.

The government is moving Singapore in the right direction by promoting new growth industries such as biomedical sciences and pharmaceuticals, thereby reducing dependence on the manufacturing sector, analysts said.

But they said Singaporeans will still feel the pinch as jobs in the new industries will likely be filled by an elite group of skilled professionals.

Apart from developing new industries, economists say Singapore also needs to foster an entrepreneurial culture similar to the freewheeling spirit which drives other Asian economies such as Hong Kong.

"In the end, there has to be a greater reduction in government presence," said Geoffrey Barker, HSBC's Hong Kong-based chief regional economist.

The government has an extensive presence in almost every sector of the economy, holding equity stakes in blue-chip companies including Singapore Airlines and Singapore Telecommunications.

"The government if you look at the GLCs (government-linked companies), their presence is huge," said Hedrick-wong.

"If I am an entrepreneur, my biggest competitor is the government. The presence of the government is very big in all the sectors. So you have not left a lot of room for the small guys to come in," he said.

(AFP) CAPTION PSA runs one of the world's busiest ports and is reputed for its efficiency, but it has seen its competitiveness chipped away.