Singapore Democratic Party (SDP) chief Chee Soon Juan fell foul of Prime Minister Goh Chok Tong on Sunday by suggesting that S$17 billion (US$9.3 billion) in taxpayers' money had been lent to former Indonesian President Suharto.

The ruling People's Action Party (PAP), which will extend its 36 years in office after the election as opposition parties are contesting just 29 of 84 seats in parliament, countered that the loan never went ahead.

Two letters delivered by Goh's lawyers on Tuesday (Oct 30) demanded formal apologies by Chee in newspapers and at campaign rallies before Friday. They also asked for damages and costs, warning that Goh would begin legal action otherwise.

"If you are wrong, better apologise. Otherwise I have no choice but move to the next step," Goh told reporters on Tuesday (Oct 30), in a message for Chee.

If he is sued, Chee would join a list of opposition leaders who have faced lawsuits by Goh, Senior Minister Lee Kuan Yew and other ruling party officials. Costs and damages have run into hundreds of thousands of dollars.

The marginalised opposition, often short of candidates and cash, also complains about redrawn electoral maps, "winner takes all" multi-seat wards and deposits of S$13,000 ($7100) per seat.

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After Singapore's 1997 election, human rights group Amnesty International said the city state may be using libel suits to suppress opposition.

In a 1998 report on human rights worldwide, the US State Department said Singapore generally respected the rights of its citizens in 1997 but cited "a number of potentially ruinous defamation suits against opposition parties and their leaders".

Ruling party officials vigorously defend their use of the courts but say they do so only to protect their integrity from unfair attacks.

"They want to make politicians all the more careful in their remarks -- that's the message," said Lee Lai To, a political science professor at National University of Singapore.

Chee, a vocal human rights advocate campaigning for jobless benefits and a minimum wage as Singapore suffers its worst recession since 1964, later apologised for his "rude" behaviour and did so again at a party rally on Tuesday evening.

Chee issued a statement saying he withdrew allegations he made about Goh and his suitability as prime minister. No comment was available from Goh's office or the ruling party.

Goh won a lawsuit after the 1997 election against the then Workers' Party leader Joshua Jeyaretnam, who was accused of libel by innuendo for announcing at a rally that a party colleague had filed a police report against Goh.

Jeyaretnam was barred from office in July when he lost a bankruptcy appeal after defaulting on defamation damages won by organisers of a Tamil newspaper that included some ruling party members.

Another opposition leader, Tang Liang Hong, has been in self-imposed exile since the 1997 election.

Tang was accused by ruling party officials of being an anti-Christian Chinese chauvinist who endangered Singapore's multi-ethnic harmony. Tang called them liars and they sued.

Tang did not return for trial and the government has since frozen his assets in Singapore.