Singapore is on sale.

In the midst of its worst economic slump in two decades, Singapore is competing furiously for the tourist dollar. At the urging of the republic's tourist promotion board, luxury hotels are reducing room prices by as much as 20 percent. Contrast that with the rising cost of hotel rooms in European cities (as the dollar loses strength), and the difference is even more significant.

For two decades now, Singapore has been an Asian success story, a 500-square-mile island republic whose robust economy belied its size. Located at the tip of the Malaysian peninsula, just 100 miles north of the Equator, Singapore shed its status as a British colony in 1965 and, under the guidance of its largely Chinese population, became the Little Republic That Could.

It could build modern freeways and make its harbor one of the world's busiest.

It could erect high-rise, luxury hotels and provide modern housing projects for its citizens in record time.

It could become a high-tech exporter and a country whose airline is famous for its dedication to service and profitability.

But while the last chapter in the economic miracle of Singapore has hardly been written, the pace is slowing. The casual observer -- noting the crowds in modern shopping centers, the skyline dotted with construction cranes and flotillas of cargo ships waiting to dock -- would hardly know Singapore is wrestling for the first time in 20 years with a stagnant economy.

But the ship building and electronics industries of Singapore have been laying off workers, and retail and wholesale prices are weakening. For visitors, increased competition among airlines serving the Pacific (a Singapore Airlines APEX round-trip ticket between Washington and Singapore currently costs $1,260) and Singapore's overbuilt luxury hotel market mean unprecedented savings.

"What I offer now is ridiculous," the manager of the French-owned Novotel Orchid Inn complained to a visitor recently. Even the Shangri-La, a favorite of Americans and consistently named by world bankers as one of the top five hotels in the world, recently cut its prices. A middle-priced double room in the hotel's lush garden wing used to go for about $140 per night; last November, the hotel dropped its rack rate (the regular room rate shown on a hotel's brochure or price list) to $120 per night. A $110 standard double is now $85 per night. On a package tour, the price can be halved.

To make matters worse for hoteliers, there will be a 50 percent increase in hotel rooms by 1989, when 10,000 new rooms will open. The largest commercial developments, Raffles City and Marina Square, which will include a number of hotels, will account for 4,000 of those rooms this year. (The original Raffles Hotel, funky and slightly fading, still serves up Singapore Slings but is more of a tourist watering hole, a reminder of a colonial era long past.)

For visitors, the slowdown of the economic boom has another, more unexpected, benefit: Historic sections of town are being spared the bulldozer. In the zeal to turn Singapore into a gleaming metropolis, parts of Singapore were destroyed. Hawkers were moved off some of the streets of Chinatown and parked under one roof of a modern building. Bugis Street, famous for its bright lights and transvestites, was bulldozed in connection with the construction of a subway system.

But wiser heads realized that no matter how valuable land in the center city might be, Singapore's history should be treasured. So enough of Chinatown and Little India remain to satisfy. The shops of Chinatown offer everything from gold to herbs to elaborate burial decorations. In Little India, the scents of jasmine and spices mingle with the fragrance of flowers being strung for wearing as colorful necklaces. And while the shopping area of Orchard Street is sophisticated and its restaurants sleek, the outdoor fish restaurants of East Coast Lagoon still serve up steaming platters of fresh seafood to customers seated at makeshift tables under the stars.

"We are the Mr. Clean of Southeast Asia," says one resident, and in Singapore, that efficiency and spotlessness along with its temperate climate draw visitors from the United States and Japan. The newspapers, which are subject to government censorship, are filled with good news. Everything runs on time. Jaywalking or littering can draw heavy fines. The landscaping is picture perfect. Slums have been replaced by government apartment buildings. To curb speeding, commercial trucks have yellow lights on their cabs that blink on if the driver exceeds 50 kilometers per hour.

And while the hotels of Hong Kong -- Singapore's biggest rival in Southeast Asia for the American tourist -- are full and charging premium prices, Singapore will remain a bargain until the number of visitors catches up with the available hotel beds.