Prime Minister Goh Chok Tong said the Internal Security Department discovered the plot last year and also found a video of the coastline made by another terrorist group seeking to attack passing US ships.

Goh did not identify the terrorist groups.

He said ``good sense prevailed'' among the five Singaporeans recruited and that ``they withdrew contact with the foreign operatives.''

Goh made the remarks to a meeting of 1200 union leaders.

Singapore has strong military and economic ties with the United States. It is one of two ports in Southeast Asia where US aircraft carriers can dock. It is also home to a US Navy logistics unit.

The United States is also Singapore's biggest trading partner.

``Now that the military action against terrorism has started there is a danger that radical groups in our part of the world may mount attacks in the region to support Osama (bin Laden),'' Goh said.

The Prime Minister said bin Laden, the Saudi exile who is the prime suspect behind the terrorist attacks in the United States on September 11, is trying to turn the fight against terrorism into a war between Muslims and non-Muslims.

About 15 percent of the 4 million people in Singapore are Muslims, mostly Malays. The majority of people in the wealthy Southeast Asian city-state are ethnic Chinese, most of them Buddhists, Taoists or Christians.

According to an AFP report Prime Minister Goh Chok Tong said Sunday (Oct 14) that Singapore faced its most severe challenge since independence in 1965, tying a worsening economic downturn to the terrorist attacks in the United States.

"The unfolding events carry grave security implications for Singapore. They will also test our social cohesion and deepen our economic problems," he said.

In a televised address, Goh identified three threats confronting Singapore, covering security, social cohesion and the economy.

He accused Saudi-born dissident Osama bin Laden, the alleged mastermind behind the September 11 attacks on the United States, of having the strategic objective of toppling moderate Muslim governments and controlling vast oil resources and Pakistan's nuclear bomb.

Goh said Singapore was satisfied the kamikaze strikes on New York and Washington were the work of bin Laden, and the US reponse was aimed at terrorists and the ruling Taliban in Afghanistan "who harbour them."

Singapore, with cells linked to Bin Laden operating in neighbouring Malaysia, Indonesia and the Philippines, was not immune to terrorism and plans were in place to deal with the threat, he said.

"The unfolding events carry grave security implications for Singapore. They will also test our social cohesion and deepen our economic problems."

Although Singapore is one of Southeast Asia's strongest economies, it was in recession mid-year because of a global downturn in demand for electronics.

Goh said hopes for a recovery by the first quarter of next year were dashed by the events of September 11.

The government did not want the city-state polarised along racial or religious lines and would deal seriously with anyone attempting to exploit the situation by inflaming tensions between racial or religious groups, he said.

On the economic front, Goh said the terrorist attacks had thrown the global economy into its most severe deceleration since the 1973 oil crisis.

"The economic outlook is bleak and uncertain. No one is sure how the military action against bin Laden and his network will pan out."

With external demand constituting 70 percent of Singapore's total demand "we will be hit harder than most other countries."

Speaking just two days after the government announced an S$11.3 billion (US$6.3 billion) off-budget stimulus package, Goh said Singapore faced a 3.0 percent economic retraction this year and would be lucky to see any growth before the second half of 2002.

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