VIENTIANE -- Oblivious to the collapse of the Soviet Union, the biggest bookstore in Laos still proudly offers a full range of Soviet propaganda tracts on the heroic life of Vladimir Lenin.

Portraits of the republic's Communist leaders are stacked near the Lenin biographies on the dusty shelves. Bored staff sit lazily behind the counters, waiting for customers who rarely arrive.

Nearby, in the national museum, a huge map shows the Soviet Union still in existence. Photos depict the leaders of the Lao People's Democratic Republic in solemn meetings with Fidel Castro and Ho Chi Minh, while exhibits describe Americans as "imperialists." Newspapers report visits by North Korean and Cuban officials as major events.

Such is the hermetic world-view of the elderly Communist leaders of this sleepy Indochinese country. Their secretive Politburo is still dominated by former Pathet Lao jungle fighters, who seem content to keep Laos isolated from the world -- almost as isolated as it was during the "Secret War" of the 1960s and 1970s, when U.S. B-52s dropped 1.9 million tonnes of explosives on the country.

Laos might be the last frontier of globalization. But the long-stagnant country of five million is finally starting to change and it is unclear whether its reclusive leaders can cope with the mounting pressures.

During a recent Buddhist festival in the capital, diplomats were stunned to find themselves in a traffic jam -- possibly the first one in the country's history. This was always a place of bicycles and motorized rickshaws, and virtually no traffic lights exist. But the number of luxury sedans and expensive jeeps has been dramatically rising and nobody is quite sure where the murky new money originates.

"People see the Mercedes cars and the booming construction of mansions, and they're starting to wonder where the money is coming from," said a Western financial expert in Vientiane. "This is supposed to be a people's democratic republic."

A tourism boom and growing trade with neighbouring Thailand explain some of the influx. But more likely sources are illegal timber cutting, drug smuggling and massive government corruption.

Along with the money has come a wave of glitzy new nightclubs, prostitution, crime, drunk driving, amphetamines and crowds of restless young people who feel frustrated by the regime's limits.

Until recently, Vientiane's nightclubs were tightly regulated with strict curfews and local women were famed for their traditional striped skirts and conservative morals. Now the bars and discos stay open until the early hours of the morning and they are packed with young women in jeans and skimpy clothing and young men with dyed hair, dancing to loud techno music and mimicking the fashions they see on Thailand's raunchy television channels.

"You can see beer shops all over the place like mushrooms today," a senior official of the Culture Ministry said last month. "When you go inside entertainment venues, it is like you have no soul."

Domestic television is heavily regulated, but almost everyone in Vientiane now has an antenna or a satellite dish to receive Thai television with its hugely popular music videos and kickboxing.

"Laos is very vulnerable and it's changing too fast," said a Vientiane businessman with close connections to the government. "All the young people are buying motorcycles and running like hell every day. They're having fun instead of working."

State control of the media has eased slightly. Internet cafés have sprouted in the cities and the newspapers often run articles on corruption and prostitution.

"We can't question the regime or its basic policies, but we are more free to discuss issues such as drugs and corruption," said Somsanouk Mixay, director-general of the state-owned Vientiane Times. Despite censorship, "there is more openness now. We can criticize the red tape and bureaucracy, and we can criticize the implementation of policies."

But the Communist leadership still keeps a tight grip. Government agents spy on personal e-mail. Organized opposition has been eliminated and independent groups are nonexistent.

Since the 1980s, the regime has promised steps to attract foreign investment and modernize the economy, but a climate of fear has paralyzed the bureaucracy and blocked reform.

Laos remains one of the world's poorest countries, overwhelmingly rural and heavily dependent on foreign aid and imports. It is widely assumed that bureaucrats rely on bribes to survive.

Many foreign investors have abandoned the country and those who remain endure endless red tape from corrupt officials seeking payoffs. One investor who refused to pay had to collect approvals from more than 20 government departments over a period of 18 months before he was allowed to open a restaurant. He ended up paying 10 times more taxes than any other eatery in the city.

"The leadership is still in the hands of people who never finished primary school, who spent their formative years fighting in the jungle," a senior diplomat said, "and they just don't get it."