By Paul Reynolds
World Affairs correspondent, BBC News website
While it would be an exaggeration to say that Nepal occupies a strategic position in the world - isolated as it is in the Himalayas - its future is being watched closely.
Tourists hoping to visit a mountain Shangri-La have been surprised
Partly this is for sentimental reasons. The kingdom used to be the destination of choice for thousands of Western hippies who thought of it as a mountain Shangri-la.
So there is a great interest in the West to see how that quiet and peaceful place (perhaps not so quiet underneath) has developed into a scene of civil war, repression, riot and uprising.
One sidebar from that time was that the one-time guru of the Beatles, Maharishi Mahesh Yogi, once propagated his vision of saving the world by "Transcendental Meditation" in Nepal, though it appears that he might simply have sent videotapes before it had television.
Not that the Yogi's message worked. But then the 1960s and their message of flower power are a long time ago. The world has moved on in more violent ways, and Nepal is a part of that movement.
Then there is the Everest trek that keeps Nepal in a wider public eye. Currently teams of climbers are preparing for their attempts on the summit during the calm weather period between now and the end of May. They have largely escaped the recent troubles, although two climbers were injured last November when Maoist rebels attacked their vehicle on its way to base camp.
And there is the added factor in Britain because Nepal is home to the Gurkha fighters who serve in the British army.
But beyond these attachments to Nepal are more serious considerations.
The main one is whether the end of monarchical power as exercised by King Gyanendra develops into democratic politics of some kind, or whether the Maoist rebellion spreads from the countryside to the cities and takes control.
It is the government of India that is the most concerned.
India itself has considerable problems with Maoist rebels. Rebels are active in several states - Andhra Pradesh, Orissa, Chhattisgarh, Jharkhand, Madhya Pradesh and Bihar.
Some of these places are a long way from the modern image of India as the growing regional and world power, whose development is spurred by high technology.
The rebellions are fuelled by issues of land and poverty and India does not want the example of a Maoist Nepal to encourage further protests.
India sent an envoy to talk to King Gyanendra, but its intervention has been criticised by the Indian opposition BJP party as "too little and too late".
The BJP president Dr Rajnath Singh said that India should exert pressure to ensure that Maoists are not given positions of influence in Nepal. He wants a renewed effort to crush the Maoist rebellion.
India fears that there are links between Maoists in Nepal and their fellow fighters in India.
"India is concerned about having a failed state at the end of the road to its north, and bordering on its own unstable state of Bihar" said Barney Smith, a former British ambassador in Nepal, "but its influence there is limited."
And China is watching as well. "China does not support the homegrown Maoists of Nepal," said Barney Smith, "and does not want a destablisation to the south of Tibet."
Perhaps for too long, the world averted its eyes from the reality of Nepal, distracted by its Shangri-La image.
It should have shown how modern ideas of democracy and development - as opposed to the communal policies urged by the Maoists - could work.
But Nepal did not manage to address the problems presented by its 28 million people, many of them clinging to a precarious existence on the crowded slopes of the Himalayas.
The monarchy and politicians have clashed for years and their failures led to the start of the "people's war" by Maoists in 1996.
Much now depends on whether some political deal can be put together and on how the army, which normally sides with the King, reacts.
It is still not clear how the power struggle between the trio of monarchy, democrats and rebels will be decided.
I visited both Nepal and another Himalayan kingdom, Bhutan, in 1997 and the difference was stark. A lot had to do with the number of people. Bhutan was almost empty.
It had little traffic (and all cars were tracked by officials at road junctions) and no traffic lights, the only pair, in the capital, having been removed as unnecessary.
The king controlled everything and, at that time, there was not even television. The Indians had built roads south the north through the mountains to be able to reinforce in case of trouble from China but the place was placid.
Nepal was already beginning to seethe. From the air, one could see that every inch of useable mountainside had been terraced and cultivated. But there just was not enough room for the people to make a decent living and the government was unable to lift them out of their plight. The rest followed.