WHILE Singapore wants to help its people earn more, wages cannot go up indefinitely and it is the country's productivity that must improve over the longer term.

Speaking at a dialogue on Tuesday, Prime Minister Lee Hsien Loong cited several ways of boosting productivity, among them educating the population well and providing good training for workers such that they continue to pick up skills that are relevant to their jobs.

"Also, it is the restructuring of the economy so that you keep on bringing in sunrise businesses and gradually phase out those that are not so successful and not so profitable," he told some 450 business leaders in town for the annual Forbes Global CEO Conference.

"Then, we can move. It's not magic, it's not easy, but it's the only way we can do it," he said during the 40-minute talk that was moderated by Forbes Media chairman and editor-in-chief Steve Forbes.

While the Singapore government has done much to address housing shortage and public transport concerns in recent years, the challenge lies in how the country upgrades itself and prospers with higher quality growth.

Mr Lee agreed with Mr Forbes' observation that wages have gone up faster than productivity, adding that Singapore had the ability to deal with this in the short term.

"Because the demand is there, the pressure to come into Singapore and invest and set up companies is there, and therefore Singaporeans are in demand. If that is the value of a Singaporean, that's good that they get it. They are getting a bonus from being Singaporean," said the prime minister.

When asked how Singapore maintains its pre-eminence and centrality as a financial centre, as well as enhance its global influence, Mr Lee admitted that it was a "continuing challenge" to do so.

"At every level, you have not arrived and you have to find new ways to move ahead. We're at a level now where we have 5.5 million people and we say we have to grow, but grow by upgrading the workers, our own people, so that they can do better jobs, earn higher pay and improve their lives," he said.

The population will have to expand along the way, but in a gradual and sustainable manner. Talent must continue to come to Singapore in order to create more wealth and generate more business and good jobs for the people, said Mr Lee.

"We are at developed country levels of income and GDP, but in fact we're not quite at developed country levels in terms of the comprehensiveness of our economy, in terms of having the multinational companies and the reach. So people look at us and say we're doing well, but we're still a small country even though we're doing well. We never forget that."

A member of the audience later asked Mr Lee a question often heard at such dialogues: What keeps you awake at night?

The prime minister replied that he was concerned about peace in the region, particularly with issues such as the ongoing territorial and maritime disputes in the South China Sea and the differences between China and Japan over uninhabited islands in the East China Sea.

Problems could also arise when it comes to the "very unpredictable" country that is North Korea, or the actions of the Islamic State of Iraq and Syria (ISIS) extremist group and other similar organisations.

Beyond these external issues, however, is the underlying basis that Singapore must do what it can to address its own challenges such as economic growth and population growth.

"(There are) challenges of maintaining political and social cohesion in a very rapidly changing world, with income inequality and uncertainties, with difficulties which are going to put a lot of pressure on societies," said Mr Lee.

"Other people cannot solve these problems for us. We have to solve our own so that we are able to work together and prosper together."