THERE are many pretenders to Shangri-la, the mythical Himalayan paradise which inspired the James Hilton novel Lost Horizon (1933).

But Bhutan is no wannabe. Wedged between India and Tibet, this country, with an estimated population of 800,000, had turned its back on everything the West has to offer.

Up until almost 40 years ago, this mediaeval time capsule and one of the world's remaining Buddhist kingdoms had neither currency nor phones, airports and tourists.

Yet only 30 years of dipping its toes into the waters of development, Nirvana and Nokia now co-exist. The mountains, which had repelled outsiders in the past, proved no match for TV and the Internet when both arrived in 1999.

But getting there is tricky not least because of its mountainous location, but also due to a strict tourist policy imposed in 1974 by its Western-educated king, Jigme Singye Wangchuck.

An estimated 6,000 visas are issued every year. Then, there is the prohibitive US$200-a-day (S$315) tax per visitor which goes towards your accommodation, full-board meals and guiding costs.

Now, thanks to the recent opening of two luxury hotels - Amankora, from the Amanresorts group, and Uma Paro, part of Singapore fashion queen Christina Ong's Como Hotels - Bhutan is seeing a trickle of new, top-grade tourists.

Uma Thurman was here. So were Cameron Diaz, Demi Moore, Richard Gere and Kate Moss. If it's not obvious already, this place is not for unwashed backpacking hippies. High-end, low impact is the official line.

Bhutan's strict tourist policy, part of a broader paternalistic concern for its people, has produced one of the quirkiest places I have ever visited.

Over 90 per cent of its population are subsistence farmers. They pray at home altars; warm themselves with a traditional Bukhari wood stove; cook on wood-burning stoves; plough their own land and walk for hours - in some cases, days - to reach the nearest village.

Centuries of isolation have also resulted in only a few surnames being used in the whole of Bhutan, Dorji - which rhymes with dodgy - being one. Everywhere, there is a Dorji bar (won't drink there), a Dorji provision store (won't buy there) and a Dorji restaurant (won't eat there either).

And it is compulsory to wear the national dress in public here. The men are in ghos or belted robes and the women are in iras or long dresses, which - while pretty - is unlikely to win Best National Costume at the Miss Universe competition, frankly.

Many tourists come for the trekking, like the 23-day Snowman Trek. Much of it is above 4,000m, with yaks bearing the equipment - complete with luxury toilet tents - along the peaks. Despite paying about US$5,000 each, few complete the arduous course.

Neither a fan of trekking nor yaks, I spent my time in and around the Paro valley - a two-hour drive from Thimphu and where the only airport and my hotel are located - visiting ancient spiritual sites, dzongs (a cross between a monastery, a civic centre and a fortress) and ornate temples of Vajrayana Buddhism.

First impression: Whether they are monks in saffron robes seeking alms or chanting mantras, chortens (Lama-ist monuments) or colourful prayer flags fluttering on long poles (left), the wind carrying entreaties to heaven, Buddhism defines the landscape.

Everywhere in the Land Of The Thunder Dragon - as it is known in Bhutan's official language of Dzongka, Buddhist iconography and mythology are omnipresent. (English is the lingua franca and most Bhutanese speak it well.)

Nowhere is this more apparent than in Taktsang, the Tiger's Nest monastery. Perched precariously on a mountainside above a 1,500m sheer drop, this is one of the country's holiest sites - on average, a Bhutanese will visit it thrice a year - and the country's most recognisable icon for most outsiders.

Legend has it that the country's revered saint Guru Rinpoche flew here on the back of a tiger and meditated in a cave for three months, anointing it with holy sacredness.

Erected in around 1684, it is a three-hour hike from Paro valley but you will be rewarded by the sweeping vistas from up there and its interiors.

For those who don't fancy the climb, Paro Dzong - a vast, white, 17th-century citadel standing sentinel above the town of Paro - is a far easier option.

Overlooking the airport, this is where Bernardo Bertolucci filmed many scenes for his 1995 film Little Buddha.

A monastery and administrative centre rolled into one, this is also the venue for Paro Tsechu. The annual five-day religious festival is a high-season - read: more travel expenses needed - tourist attraction and the subject of many travel documentaries.

Walking through Paro Dzong's vast courtyard, one can hear the murmurs of crimson-robed novice monks chanting or see them scurrying between rooms or drinking the pungent butter tea. Even the smell here - musty and acrid - seems ancient.

It is not all about religion, of course. Bhutan is any nature-lover's dream. And no wonder the backpackers are kept out: Wild marijuana grows in abundance.

Then, there is the wildlife, like the black-necked cranes which number no more than 6,000 worldwide. Now, I am only fond of certain birds but, in a moment of madness, I abandoned the comfort of my hotel and made an overnight trip to Phobjikha Valley - at insane extra cost, no less - to see them.

A four-hour drive on narrow roads to the east of Paro, the valley is where the birds, which fly in from Tibet, winter. It was a memorable trip: The birds were fantastic; the four-star - actually, more faux-star - hotel was horrid.

On the return trip to Paro, I passe Thimpu, home to satellite dishes, four-storey skscrapers and no more than 50,000 Bhutanese. After the serene other-worldly beauty of Paro, it feels a little brash, a little too bustling, busy and horribly modern.

But here's the thing: When we praise Bhutan, the terms we use to describe its untaintedness, its backwardness, its stasis between old and new are all condescending and patronising.

We, outsiders appreciate Bhutan for all its backward anachronistic glory and secretly hope it stays that way. But like any under-developed nation, this hermit kingdom, probably, wants to be brought up to date with the times.

By prizing Gross National Happiness - a concept pioneered by its modernist and pragmatic king - over Gross National Product, Bhutan has up till now managed to cherry-pick the best of Western hits - modern medicine, for example - and play the development game by its own rules.

But with tourist arrivals expected to hit 13,000 annually from next year, lucrative tourism could sound the death knell for Bhutan's reputation as Shangri-la.

FIVE THINGS TO DO IN BHUTAN

1. If you can afford it, stay at Uma Paro or Amankora, the only two five-star hotels there. Experience 21st-century luxury set against an ancient way of life. Surreal.

2. Visit the national museum, a six-floor round building which was completed in 1656. Among the exhibits are a spectacular collection of thankas (Buddhist cloth paintings).

3. See the country's unique national animal, the Takin. Imagine a goat's head on a cow's body. Sounds hideous, and it is, but you have to see it to believe it.

4. Eat yak meat. Yes, the animal lugs your gear on treks but it's also considered a Bhutanese delicacy.

5. Attend Paro Tsechu (March 27 to 31, every year). It's an annual festival of dances. Think of it as Mardi Gras Bhutanese-style.