Singapore Democratic Party (SDP) chief Chee Soon Juan fell foul of Prime Minister Goh Chok Tong and Senior Minister Lee Kuan Yew by suggesting S$17 billion (US$9.3 billion) in taxpayer money had been lent to former Indonesian President Suharto.

The ruling People's Action Party (PAP), which will extend its 36 years in office on Saturday because opposition parties are contesting just 29 of 84 seats, said the loan never went ahead.

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

"I expected this to happen -- that's why we're very careful," Steve Chia, secretary general of the National Solidarity Party told Reuters on Thursday. "We have always been treading very carefully...not to get ourselves into such unnecessary actions."

Chia, who is running under the banner of the new four-party Singapore Democratic Alliance, said the group's leaders had warned candidates to watch what they say.

"No personal attacks. When you want to quote any figures, you must make sure you know the figures well. The best advice is to argue on principles and policies," Chia said.

CHEE APOLOGISES

Lee's lawyers sent Chee a letter on Wednesday demanding an apology and compensation because he had "falsely alleged, inter alia, that our client is dishonest and unfit for office".

The letter stated that if Chee did not comply by Friday, Lee's lawyers would commence legal proceedings.

Lee warned that five members of Chee's party who mentioned the loan allegation while campaigning may also face legal action.

Lee's move follows two letters from Goh's lawyers on Tuesday demanding 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.

"I have to make sure that all the conditions are met," Chee told Reuters on Thursday. "They may want to sue me anyway."

Chee, a vocal human rights advocate campaigning for jobless benefits and a minimum wage as Singapore suffers its worst recession since 1964, read out a formal apology to the two PAP leaders on Wednesday evening.

Beyond debilitating lawsuits, the marginalised and cash-strapped opposition also complains about redrawn electoral maps, "winner takes all" multi-seat wards and deposits of S$13,000 (US$7100) per seat.

After Singapore's 1997 election, human rights group Amnesty International said the city state may be using libel suits to stifle 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 file lawsuits only to protect their integrity from unfair attacks.