(SINGAPORE) Go for higher growth and develop 'real depths of capabilities' in seven or eight areas. That, in a nutshell, is an economic strategy Finance Minister Tharman Shanmugaratnam sees for Singapore in the face of growing volatility.

'Don't go for a lower growth path for the sake of managing volatility. Go for a higher growth path but prepare our businesses and our workers well for the occasional shocks and respond quickly when they come; get out of it quickly, get out of it stronger,' he said in closing remarks at a forum on industry proposals for the Economic Strategies Committee (ESC).

As a global city, Singapore will have a more volatile growth path than most, said Mr Tharman, who chairs the 25-member ESC formed in June to come up with a new blueprint for the economy's next phase of growth (Click here for table).

But 'what matters is to keep the average high', he said. 'If you try to dampen all volatility, you usually end up with a lower average as well,' he said, pointing out that, had it not been for above-trend strong growth in 2006 and 2007, Singapore's growth over the latest cycle, including 2008 when growth slowed sharply, would have fallen below 5 per cent. Wage growth, too, would have been 'very weak' over the period.

So, 'manage the short term well, put in buffers where we can when there's a major external shock, but think about how our growth path can stay superior', he said.

In a recent interview with UK's Financial Times, Mr Tharman said Singapore's trend growth over the next five to 10 years will likely be 'a shade lower' than in the past, due to labour and other resource constraints in a maturing economy.

Singapore's growth had averaged 5 per cent a year over the last full economic cycle from 2003 to 2008, he noted. Up till mid-2008, before the onset of the economic crisis, it was thought that Singapore's medium-term growth potential had risen a couple of points to perhaps 6-8 per cent.

But Mr Tharman pointed out, in the FT interview, that Singapore is still growing at a trend rate that is faster than advanced economies with a similar per capita economic level, 'and we think we can still grow at a trend rate that is significantly faster than other countries in the same league'.

The ESC is looking precisely at strategies to grow Singapore's future as a leading global city in the region, to enable sustained economic growth, faster than other advanced economies.

That means, for one thing, focusing on the fundamentals, Mr Tharman said yesterday at the forum at the Hyatt Hotel.

Developing in-depth capabilities in core areas is key, he said, taking up a proposal by the government parliamentary committee (GPC) on finance, trade & industry, on building 'ecosystems of excellence' in Singapore.

So while Singapore will not try to pick winners, 'we would need to identify emerging trends and work with early adopters, global or local, to develop clusters from real strength', Mr Tharman said. 'And we can probably be good at seven or eight areas', and develop in-depth capabilities in each, he added.

While Singapore is highly rated as a business hub, 'across the board, up and down the ladder' it does need 'a step change' in competency areas such as expertise and workforce skills in its next phase of growth, he said. 'And that depth of excellence in each cluster - whether it's R&D, commercialisation, worker skills - has to be built. Government working with business, working with the unions, can do it better in Singapore than in many competing cities.'

Singapore's corporate diversity of global SMEs, foreign MNCs and local firms is another big strength, he said, that enables it to stand out from, say, Shanghai and Bangalore, which are not as diversified and as plugged into Asia and the Middle East, as Singapore is.

But 'I think we do need to nurture a stronger base of local companies', Mr Tharman said. The concerns of local firms, especially SMEs, dominated the forum yesterday, one in a series of consultations between the ESC and various sectors before it puts out its report in January.

At the start of the forum, Mr Tharman said the ESC is 'open to all ideas at this point' and studying all proposals put forward.

Among other things, it is looking at how other governments, in both developed and developing economies, are working with banks and private financial players to spur financing, particularly of longer-term projects.