Singapore's ruling party suffered a stinging rebuke yesterday when it lost a parliamentary by-election despite promising more reforms and massive public spending to appease a restive electorate.

The opposition Workers' Party defeated the People's Action Party (PAP), which has been in power for more than 50 years, following a campaign dominated by issues including the rising cost of living and immigration.

Workers' Party candidate Lee Li Lian singapore by-election Workers' Party candidate Lee Li Lian ( left ), 34, a middle-class corporate trainer, comfortably beat PAP candidate Koh Poh Koon, 40, a prominent surgeon who was strongly backed by Prime Minister Lee Hsien Loong, in the PAP stronghold of Punggol East.

"This is a devastating loss to the PAP," said Bridget Welsh, an associate professor in Political Science at the Singapore Management University.

"There's a gap between what ordinary Singaporeans are experiencing and what the government is telling them," she told AFP .

The PAP has now lost two by-elections in less than a year, adding to its woes after suffering its worst performance in a general election in May 2011.

But it remains in firm control, holding 80 of the 87 seats in Parliament despite its falling popularity. All seven opposition seats are held by the Workers' Party and the next general elections are not due until 2016.

By-election win an ‘important episode'

Yesterday's hotly contested election turned a quiet residential suburb into the focus of a nation.

Two smaller opposition parties had also fielded candidates, raising hopes among PAP supporters that the opposition vote would fragment in its favour, but it was not to be - the Workers' Party won 16,038 votes to the PAP's 12,856.

It was a dramatic reversal - two years ago, PAP won Punggol East by bagging 16,994 votes against Workers’ Party’s 12,777. In that contest, the Workers’ Party also fielded yesterday’s victorious candidate, Lee.

Thousands of spectators gather at an Singapore People's Party's (SPP) election campaign rally at Bishan Stadium 2 MP Sylvia Lim, who chairs the Workers' Party, said the election was an "important episode" that showed "the value of political competition in getting the government to sit up and take notice".

The PAP, founded by the prime minister's father Lee Kuan Yew, who ruled for 31 years, has also come under attack for a rapid influx of immigrants accused of stealing jobs, driving up housing prices and straining public services.

Foreigners now make up about 38 percent of the city state's 5.3 million population, up from about 25 percent in 2000.

After the PAP garnered an all-time low of 60 percent of all votes cast in the 2011 election, the government slowed down the intake of foreigners.

It promised to spend billions of dollars to improve mass transport, expand public housing and give cash and other incentives for couples to have more babies and help reduce the island's dependence on foreigners in the long term.

'Giving us candies not good enough'

The by-election was called to fill a seat left vacant when parliament speaker Michael Palmer stepped down and quit the PAP in December after he confessed to an extramarital affair.

"I want a difference," said Nita, a woman in her 30s. "If the Workers' Party can do well in Punggol East, the other constituencies are also watching."

The PAP has won every national election since independence in 1965, transforming the post-colonial port into a major financial centre by keeping the economy open and society regimented.

lee hsien loong "I respect the choice of Punggol East voters," PM Hsien Loong ( right ) said in a statement. He called on people to refocus on national issues including the 2013 budget and a new population and immigration plan the government is preparing to deliver.

"The PAP will continue to improve the lives of Singaporeans, and present our report card for voters to judge in the next general elections," he said.

But yesterday's by-election shows many people expect more from the government, or at least a bigger say for the opposition.

"The PAP forgets us after the elections - only gives candies during elections and terms and conditions after," said Daniel Chua, a 58-year-old consultant. "The Workers' Party has the heart to serve."

- Agencies