Perched in the Himalayas between India and China, Bhutan is 70% forested. The land rises from the low, tropical southern strip, through the fertile central valleys, to the high Himalayas, inhabited by seminomadic yak herders. Formally a Buddhist state where power is shared by king and government, Bhutan began modernizing in the 1960s, but has chosen to do so gradually, and remains largely closed to the outside world.

The majority of the population, the Drukpa peoples, originated from Tibet and are devoutly Buddhist. The Hindu minority is made up of Nepalese who settled in the south from 1910 to 1950. Bhutan has 20 languages. Dzongkha, the language of western Bhutan, native to just 16% of people, was made the official language in 1988. The Nepalese community has reacted strongly, regarding this as "cultural imperialism."

Strengths

New development of cash crops for Asian markets (cardamoms, apples, oranges, apricots). Hardwoods in south, especially teak, but exploitation currently tightly controlled. Large hydroelectric potential.

Weaknesses

Dependence on Indian workers for many public-sector jobs from road building to teaching. The majority of the population are dependent on agriculture. Cultivated land is extremely restricted because of steep mountain slopes. Very little industry. Few mineral resources.

The modernization of Bhutan's absolute monarchy began in 1961. Under further changes proposed in 1998, the king relinquished his right to appoint the government in favor of a cabinet elected by the National Assembly. The National Assembly was also empowered to pass a vote of no confidence against the king. These proposals came as a response to a prodemocracy movement fueled by ethnic Nepalese opposed to the Drukpa-dominated political system.

Bhutan's closest links are with India. Relations with China are cordial and negotiations to settle the China–Bhutan border have progressed smoothly since 1984. There is tension with Nepal over Bhutan's treatment of its ethnic Nepalese minority and the influx of Bhutanese refugees into Nepal.

The army is under the command of the king, and is trained by Indian military instructors. India provides de facto military protection and is obliged to defend Bhutan against attack.

Bhutan's forests remain largely intact, and logging is very strictly controlled. Hydroelectric potential is considerable, but few dams have been built. Power is sold to India from the Chhukha Dam, bringing in substantial foreign earnings.

Bhutan's forests stabilize the steep mountainsides and supply the bulk of its fuel needs. Road building, begun in the 1960s, is the biggest cause of deforestation, which has led to topsoil erosion. The high northern pastures are at risk from overgrazing by yaks. Traditional Buddhist values instilling respect for nature and forbidding the killing of animals are still observed.

The main surfaced road runs east–west across central Bhutan. Two others run south into India. Only the national airline, Druk Air, flies into Bhutan.

Free clinics, along with Thimphu's hospital, provide basic health care. Progress is being made in child immunization, and monks have been persuaded to teach hygiene. Infant mortality is high. Bhutanese, Tibetan, and Chinese traditional medicines are widely practiced.

Education is free. A small minority of children attend secondary school. Teaching is in English and Dzongkha. There are no universities.

Levels of violent crime and theft are low. In 1991, Driglam namzha, an ancient code of conduct including the requirement to wear traditional dress, was revived, with imprisonment or fines for those not in compliance.

Most of Bhutan's people are chronically poor, although starvation is virtually unknown. There is a small middle class, consisting of public employees and storekeepers.

Tourism is restricted to protect Bhutan's culture and natural environment; entry has been easier since the industry was privatized in 1991. Most monasteries are closed to tourists. In 1998, fire damaged the famous Taktsang monastery.

The Drukpa, originally from Tibet, united Bhutan in 1656. In 1865 the Drukpa lost the Duars Strip to British India.

• 1907 Monarchy established.
• 1949 Independence.
• 1953 National Assembly inaugurated.
• 1968 King forms first cabinet.
• 1971 Bhutan joins UN.
• 1990 Ethnic Nepalese launch campaign for minority rights.
• 1998 King proposes to reform government.
• 1999 First TV service inaugurated.