As the Drukair aeroplane dips steeply on its descent to Bhutan’s Paro International airport, the tiny Himalayan country looks as it might have for centuries: snow-capped mountains interspersed with green valleys and dotted with traditional red-and-white buildings.

But after a two-hour drive to the capital Thimphu, the busy streets are decidedly different and signs of development are everywhere. A new Oberoi hotel is under construction in the centre, while across the country large tracts of land are being turned into hydroelectricity plants. One of the world’s last countries to embrace modernity, Bhutan is now, finally, coming into its own.

For a long time the tiny land-locked kingdom of just 725,000 people was seen as a curiosity: a place where the monarchy wielded absolute power, and host to the unique concept of Gross National Happiness (GNH) – considered a far more important marker than GDP. But in the 1970s Bhutan started to cautiously open up to the outside world, finally converting to democracy in 2008. It’s why Bhutan is often viewed as a kind of petri dish of the social, cultural and economic changes that accompany modernisation.

Now Bhutan is becoming a progressive and outward-looking society with a per capita gdp of just under $7,000 (€5,100) – the highest in South Asia. Hydroelectricity is its fastest growing industry, largely underwritten by India – its main customer. It is emerging as an important regional player, particularly given that it is positioned between India and China, two countries vying for Asian superiority.

“You’re talking about a country that 30 years ago was completely isolated, tot-ally underdeveloped and probably one of the poorest countries in South Asia,” says Lily Wangchhuk, a prominent former diplomat, writer and spokesperson who now heads a fledgling political party. We meet in a restaurant on the upper floor of a new supermarket in Thimphu; tiramisu is on the menu and K-pop blares from the speakers. Through the expansive picture windows, mountains stretch out into the distance.

“We’ve seen a lot of infrastructure development and economic growth,” she says, in between sips of her Illy coffee. “The change in a short time has been immense, particularly for the older generation like my mother who is 86 and who grew up in a Bhutan that was completely undeveloped and cut off.”

Traversing this divide is difficult for any country, particularly when it comes to retaining strong links with indigenous culture. The monarchy and government in Bhutan have pledged to keep close watch over the country’s modernisation; some say their leaders can be a little too watchful. But their intention is sound: they don’t want to make the mistake they’ve seen other developing nations make of losing values and traditions in the quest for economic development.

So strict measures are in place: 70 per cent of the country is forested and will remain so, all buildings must have traditional exteriors and government employees must wear Bhutanese garments. In February the government placed a large order for electric cars as part of a carbon-neutral drive. It all makes for a country that is, despite pockets of poverty, exceedingly picturesque. Buddhist chortens and prayer wheels mingle with intricately painted wooden door and window frames, while dzongs (forts) tower over many towns.

Last July the country held its second democratic elections and the then opposition party, led by Harvard graduate and now prime minister Tshering Tobgay, swept to power in an unexpected victory.

Many took the People’s Democratic Party’s victory as a sign of unhappiness with the former leadership – this in a country where the pursuit of happiness underpins day-to-day life. Many Bhutanese point out that with modernisation comes social problems, such as street violence, unemployment, rising corruption and drug abuse.

The gnh policy, initiated by former king Jigme Singye Wangchuck (father of current king Jigme Khesar Namgyel Wangchuck), measures quality of life based on mostly qualitative metrics including governance, conservation, living standards and cultural preservation. The former prime minister, Jigme Thinley (see Monocle issue 28), worked hard to promote gnh both domestically and internationally. But Tobgay is rather less enthusiastic about the principle and has seemingly sought to distance himself from it.

And he is not alone as it appears there is a schism within Bhutan over how great a role gnh should actually play. Some, like Lily Wangchhuk, want to see gnh preserved and placed at the centre of Bhutan government policy. “Happiness is a collective achievement. We do not believe a person in isolation can pursue happiness; we are social beings and there is a need for us to interact with one another. For us, collective happiness transforms into GNH.”

But Bhutan’s younger generation seems to look upon it as an embarrassing relic. Revellers at the Thimphu live music venue Mojo Park groan when the topic is broached. “You’re not here to write about gnh are you?” says Tenzin Jamtsho, 30. “There are so many other things going on in Bhutan.” Jamtsho, a government engineer, part-time radio DJ and singer, studied in Osaka but prefers the relaxed Bhutanese lifestyle. “There, I was ruled by this,” he says, pointing to his watch. His attitude is echoed by Mojo Park’s owner, 35-year-old Kinley Wangchuk, who gave up a government job to work in entertainment.

“Happiness is a choice, it’s a philosophy,” he says. “It’s about having the opportunity to do whatever you want in life.”