July 20, 2007: Civil unrest is growing. Royalists are now demonstrating, and fighting those who want to eliminate the monarchy. The U.S. believes the Maoists still want absolute power, and will continue to list the Nepalese Maoists as a terrorist organization. American intelligence indicates that there is a dispute within the Maoist movement, over exactly how to take absolute power. It's apparently a matter of timing, and how much to cooperate with democratic parties in the meantime.

Half a dozen bombs recently went off in the south, but police believe this is the result of criminal gangs extorting money from businesses. Meanwhile, the government has told separatist groups in the south to start negotiating by the end of the month, or face a military and police crackdown. In the capital, criminal gangs are becoming more aggressive, given the number of police diverted to crowd and riot control.

Despite the unrest, the tourist industry continues to thrive and grow. For the first six months of the year, tourist arrivals were up 37 percent, compared to last year. Some 75 percent of the tourists are from Asia, particularly India.