The government's efforts to improve Singapore's tertiary education system cannot be just about increasing the number of university places, says Prime Minister Lee Hsien Loong.

Some countries have found that having a large proportion of their students going to universities "does not necessarily guarantee happy outcomes", he said at the opening ceremony of the National University of Singapore's (NUS) University Town campus last night.

About 27 per cent of each cohort of students currently get a place in one of Singapore's publicly funded universities, and the target is to hit 40 per cent by 2020.

In his speech, Mr Lee talked about the situation in South Korea, where more than 70 per cent of each cohort attend university.

The problem is that the South Korean economy is unable to generate enough jobs for all of them when they graduate, especially jobs that can match their training and aspirations.

As a result, the unemployment rate of university graduates is even higher than that of those from vocational high schools, he said.

Over in Denmark, half the cohort go to university, but more than a quarter of those who graduated in the past year are still without a job, he said.

"Our universities must equip students with skills that are relevant in the future and which enable them to hold good jobs," said the prime minister, adding that Singapore must learn from these overseas examples.

Universities here must also maintain their rigour and standards, said Mr Lee, noting how a study by the Paris-based Organisation for Economic Cooperation and Development (OECD) found that university graduates in countries like Italy have lower literacy levels than even high-school graduates from Japan and the Netherlands.

"These considerations are very much in mind as we expand our university sector," said Mr Lee.

While Singapore's public universities have "come a long way" since Independence 48 years ago, he said the challenge for them would be to keep on improving and to serve Singaporeans better.

Progress cannot be measured by international rankings alone, he said, because the local institutions are different from top universities elsewhere such as Harvard in the US or Oxford in the UK, as these admit only a "very small percentage" of university-going students in their countries.

In Singapore's case, the public universities take in the bulk of Singaporean students who go to university, said Mr Lee.

While rankings bring good repute, Singapore's universities must go beyond the rankings to develop every student to his or her full potential and across a broad range of attributes.

Many state-funded universities in the United States, such as the California state universities, have done this well, and our universities have improved significantly in these areas as well, said Mr Lee.

He also made the point that universities here have important national and social roles to develop their students' social conscience and character, and imbue in them "the sense that they have a responsibility to take Singapore forward".

Earlier in the day, Mr Lee went on a guided tour of the NUS University Town, a sprawling campus where the prime minister himself had officiated at its groundbreaking ceremony more than five years ago.

University Town, which first opened in 2011 and is now complete, has various residential colleges where students live and learn together with their peers and professors.