Amid continuing unrest in Nepal's Tarai (Lowlands) region and elsewhere, eventual abolition of the monarchy looks certain. But implementation of the country's peace process remains stalled with postponement of the Constituent Assembly elections originally scheduled for June 2007 and disagreement between the Nepali Congress Party and leftist parties over the electoral system to be adopted for these polls. In Bhutan, the process of democratization appears to be deepening and the economy is growing, but the issue of Bhutanese refugees living in Nepal continues to be an irritant both domestically and in terms of intra-state relations.

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