The governing People's Action Party -- which has been in power since 1959 and is campaigning for a general election on Nov 3 on its record of success in solving problems and surmounting crises - has identified lower business costs as one of the pathways to a more prosperous future.

Since 1995, the government has been devising ways to streamline business transactions by replacing cash and checks with electronic payments. The aim is to eliminate notes and coins by 2008, although officials concede that this may be difficult to achieve for all transactions.

The plan to pay bills electronically seems a relatively painless way to take this island-state into the future, considering that Singapore, which saw growth of nearly 10 percent in 2000, has plunged into a deepening recession that is expected to shrink the economy by about 3 percent this year.

Officials warn that the slump will be the worst in more than 30 years and probably throw at least 25,000 people out of work this year alone, raising the unemployment rate to 4.5 percent.

Despite the downturn, the party of Prime Minister Goh Chok Tong is expected to retain power by winning a large majority of seats in the elections for Parliament, partly because the 22 opposition parties contesting the poll lack cohesion or credible alternative policies.

Still, Mr Goh, a former executive of the government shipping line, has warned that Singaporeans face a more difficult and much less certain future after becoming accustomed over many years to rapid growth, virtually full employment and constantly rising living standards.

"Singaporeans must recognize that we might never return to the heady growth of the last three decades," he told a meeting of trade union leaders and employers shortly before dissolving Parliament on Oct. 18 and calling the election. "While strong growth of above 6 percent may seem to be the natural order of things for many Singaporeans," he said, "this will no longer be so in the future because of the changed world around us."

Since gaining independence from Britain in 1965, Singapore has seen its economy expand an average of 8.7 percent a year, adjusted for inflation, propelling it from the Third World to the First World in little more than a generation.

But Singapore, with a population of barely 4 million, is one of the most export-dependent of countries, with trade amounting to three times its gross domestic product. Several things have happened simultaneously to blunt demand for its exports, officials said.

Demand in the United States and other Western markets has fallen sharply, coinciding with a slump in neighboring countries such as Malaysia and Indonesia that have also been big customers of Singapore.

At the same time, rapid growth in China is drawing investment and jobs away from Singapore and other countries in Southeast Asia that have higher costs and smaller markets.

"Many of the jobs that are lost during this downturn will be gone forever, as the companies which have uprooted themselves are unlikely to return," Mr. Goh said, adding that he had set up a high-level interministerial committee to work out a blueprint for restructuring the economy and changing its development strategy.

The risk of a downward slide for Singapore was accentuated when the World Economic Forum released its annual report on global competitiveness Oct. 19. It showed that Singapore had slipped again and was now the fourth most competitive economy in the world after being ranked second in 2000 and first from 1997 to 1999.

Less exacting governments in Asia and elsewhere would be delighted with such a ranking.

The next most competitive Asian economy after Singapore in the survey was Taiwan, which ranked seventh. Japan, which has barely been able to grow at all for more than a decade, was ranked 21st.

Senior Minister Lee Kuan Yew, who led Singapore from self-government in 1959 until he stepped aside for Mr. Goh to take over as prime minister in 1990, said the island-state had the resources to ride through the short-term difficulties.

"It is the longer-term changed circumstances that we have to prepare for," he told university students last week. "We have to remake Singapore over the next 10 to 20 years."

Critics say Singapore has become too reliant on manufacturing and foreign investment for growth and that the government should reduce its pervasive role in the economy to allow innovation in the private sector to thrive.

"High domestic savings allied to investment inflows from export-focused multinational corporations have fueled the island republic's ascent to prosperity," said Daniel Lian, an economist at Morgan Stanley Dean Witter Co.

But he added that as a result of this process, Singapore's national resources had been "corralled" to serve a coalition of government-linked companies and multinational corporations at the expense of creating "a critical mass of thriving local enterprises." Michael Porter, a competitiveness specialist at the Harvard Business School, told a conference in August that the Singapore government itself stood in the way of competition and innovation. "It preempts large fields of the economy from the private sector, from innovation," he said.

Mr Porter said Singapore should reduce its dependence on manufacturing and expand its service sector in such areas as health care, education, consulting and engineering for which there is a growing demand in the Asian region.

Nearly 6000 multinational corporations have invested in Singapore, and many use it as a manufacturing base or as their regional headquarters because of its political stability, reliable infrastructure, communications and financial services.

The main local competition to these companies comes from Singapore government-linked enterprises, including listed entities such as Singapore Telecommunications Ltd., the industrial conglomerate SembCorp and DBS group, the largest Southeast Asian bank.