The End of Shangri-La; A political vacuum and government incompetence are weakening resistance to the longstanding insurgency.

Byline: Jenny Dubin

Last Tuesday the residents of Katmandu were jarringly reminded that their nation is not the idyllic redoubt it used to be. An enormous bomb blast ripped through a downtown government building still under construction. Apparently planted by Maoist rebels, the blast injured 38 people, the highest number of casualties recorded in a single day in the Katmandu Valley. The bombing wasn't an isolated incident: over the course of a month, beginning in mid-August, rebels bombed two luxury hotels, forced a month-long shutdown of more than 35 businesses, announced plans to blockade the Katmandu Valley (forcing the Army to help shuttle food and supplies into Nepal's capital for a week) and bombed the American Center--their first direct attack on a Western diplomatic target.

Officials in Nepal have finally woken up to the fact that the Maoist insurgency that began nearly nine years ago poses a genuine threat to the government. "Over the past two years the Maoists have obtained the ability to roam much more broadly through the country," says a Western diplomat in Katmandu. "We are much closer to that which seemed almost laughable two years ago; a Maoist takeover has become possible. It has to be taken very seriously."

The rebellion has been growing in strength just as the democratically elected government has been weakening. Since elections were introduced 14 years ago, Nepal has had 14 different governments. In the last two years the Parliament has been dissolved and King Gyanendra, an unpopular figure only raised to the throne after most of his family was killed in a palace massacre, has hired and fired three prime ministers. One of them, Sher Bahadur Deuba, who'd been sacked for "incompetence," is now once again running the country. Ordinary Nepalis are frustrated. On September 1 riots broke out in the capital after 12 Nepalese citizens were killed in Iraq. The government's response to that crisis was slow and telling. "There is no security in this country," says Tulsi Tladhar, 38, a motorcycle-parts dealer whose business was destroyed by the mob.

The situation is particularly bad outside the capital. The Maoists, with upwards of 5,000 hard-core combatants, now exert some degree of control over two-thirds of the countryside. Many villages in Nepal's far western region stand deserted owing to Maoist threats of violence and forced enlistment, as well as the lack of a reliable food supply. The Geneva-based Global IDP Project estimates that between 100,000 and 200,000 people have been displaced as a result of the conflict, ...