Saturday's vote pits the incumbent Peace and Prosperity party (DPT) against the People's Democratic Party, which emerged as the two leaders following a primary back in May that saw four other parties elminated.

The country's chief election commissioner, Kunzang Wangdi, said a total of 850 polling stations had been set up, many of them in remote mountain villages. About 400,000 people are eligible to cast their ballots in the polls. A spokesman for the election commission told the AFP news agency that they expected a turnout of "more than 60 percent," somewhat better than in the first round.

Although the DPT won the 2008 election by a landslide and won the first round of this year's polls with 45 percent of the vote, observers said Saturday's polls were too close to call.

"The general perception is that it could be a neck and neck race, where every vote counts," an editorial published on the website of the national Kuensel newspaper read.

Among the issues said to be foremost in the minds of the kingdom's voters are rising fuel prices, after neighboring India cut subsidies on cooking gas and kerosene to Bhutan. The country has also been struggling under the effects of a credit crunch, another factor that has hurt the popularity of the government.

"People blame the incumbent government for not addressing the economy which is in a very bad shape, and the subsidy cut. All this seems to be adding to their woes," political analyst Kencho Wangdi told AFP.

Bhutan's king gave up the monarchy's centuries-old absolute power five years ago, allowing the introduction of democracy to the Himalayan kingdom, which didn't introduce television until 1999.

Results of Saturday's vote aren't expected until Sunday.

pfd/mkg (AFP, dpa, AP)