It is known as "the last Shangri-La" -- a remote Himalayan nation, rich in natural beauty and Buddhist culture, where national happiness is prioritised over economic growth.

But urban youngsters in the kingdom of Bhutan are quick to challenge its rosy reputation.

"We can see the people are not happy," said Jigme Wangchuk, a social worker and recovered drug addict in the capital Thimphu, where he works at a drop-in centre for young substance abusers.

"We are facing so many challenges, where many people are suffering," the 24-year-old told AFP.

Drinking, especially home-brewed rice wine, has long been part of Bhutanese culture, but alcohol liver disease has become one of the top killers at Thimphu's main hospital, a National Statistics Bureau report said last year.

Increasing drug abuse by young people, especially of pharmaceuticals, has also become a major concern as modernisation takes hold in what was one of the world's most isolated countries for centuries.

The kingdom only allowed foreign tourists in 1974, television in 1999 and democracy in 2008.

It still has an otherworldly feel to outsiders: the national dress is worn to work and school, monasteries and prayer wheels dot the breathtaking landscape and old fortresses serve as government offices.

But the traditional social fabric is starting to show the strain.

"The crime rate is increasing over the years, with breaking into people's houses and muggings that were virtually unknown 10 years ago," said Damber K. Nirola, one of two psychiatrists in the country of fewer than 750,000 people.

"The biggest problem that we are now challenged with, and I think will increase over time, is unemployment, and along with that comes drugs and alcohol."

Such problems may seem surprising in a nation whose trademark is "Gross National Happiness" -- a term that began as an off-the-cuff remark by the former king in the 1970s and has since become a fully-fledged development model.

Unlike other countries' focus on gross domestic product, Bhutan's "GNH" is designed to protect the environment and culture, promote good governance and pursue sustainable socio-economic development.

This alternative vision of balancing spiritual and material wealth has won global attention and praise, drawing a stream of academics and well-being gurus to happiness conferences in Bhutan.

But some Thimphu residents are sceptical of how GNH has evolved, mentioning jokey alternatives such as "government needs help" and "gross national harassment".

The Gross National Happiness Commission, Bhutan's planning body, screens all new policy to ensure it complies with the guiding GNH principles, while a complex index has been devised to try and measure people's well-being.

Although the basic concept appears to have support in Bhutan, there are doubts about its implementation.

"Looking at the problems in the country, I don't think GNH is there," said Jamyang Tsheltrim, a 21-year-old student, in one of Thimphu's popular snooker halls.

As with many others, one of Tsheltrim's chief concerns is the lack of desirable employment for young people in Bhutan, where the median age is 26 and more and more people are trying to join the workforce.

Officially, Bhutan's youth unemployment statistics decreased from 12.9 percent in 2009 to 7.3 percent in 2012, although the figures have been questioned.

Prized white-collar jobs for educated Bhutanese are limited by an under-developed private sector, while manual work in the booming construction industry is largely left to Indian labourers from across the border.

"There's a mismatch in the demand and the supply of jobs," said Nirola, adding concern that youngsters are abandoning agriculture -- still the main source of livelihood -- and leaving their elders to manage the fields.

Underlying the problems is Bhutan's huge dependence on its giant neighbour India for investment, aid and imports. Last year the country ran out of Indian rupees on too much demand and suffered a major credit crunch.

The economic crisis peaked around the time that Prime Minister Jigmi Y. Thinley -- standing for office again next month -- was promoting the happiness philosophy at a high-level United Nations meeting in New York.

"That is when GNH came under heavy criticism from a lot of people, saying that our government leaders are more interested in promoting GNH outside Bhutan," said Tenzing Lamsang, editor of The Bhutanese newspaper.

He said there was a "denial mindset" over the growing problems back at home, where GNH has become a "highly intellectualised" concept that is popular with the elites, but yet to be fully grasped by most citizens.

"We haven't learnt to walk but we are already trying to run 100 metres," Lamsang added.

Defenders of GNH agree that it will not solve everyone's problems, but say it provides a more enlightened guideline than simple monetary measures.

Pema Thinley, a researcher at the Centre for Bhutan Studies think-tank which devised the GNH index, says their philosophy gets an unfair rap owing to unrealistic expectations of a "utopian-like state".

"GNH is a goal that the whole Bhutanese people... is trying to claim, trying to achieve. Right now nobody is saying that Bhutan has achieved Gross National Happiness."