It's almost a backpacker cliché now, 'the loop' that takes you from the delightful northern Thai city of Chiang Mai, up past Chiang Rai to the border town of Chiang Khong and then down the winding, stately Mekong to Luang Prabang. It is a great trip which opens the mind and heart to a simpler existence. Far from the bustling tourism of Thailand, the backwater country of Laos carries on, shrugging off its hushed-up bit part in the Vietnam War. It is hard to believe this tranquil landscape was once the most bombed country in the world.

We never grew tired of shouting 'hellos' and waving to excited children running down to the river's edge. The waterway is the centre of life today as it has been for centuries. Women wash their hair in it, children play and swim in it, men in hollowed-out tree trunks fish on it, the village vegetable gardens line it and myths and stories spring from it.

As we neared the town from the river, not much could be seen except a golden spire piercing the leafy canopy. After two days of hypnotic scenery it was hard to believe we were here at last. We trooped off the boat onto a ramshackle quay surrounded by boys offering to carry our bags up the steep staircase.

Luang Prabang (city of the golden Buddha) is a jewel of a town, located at the confluence of the Nam Ou and Mekong rivers, making it a great centre for exploring some of Laos' interior. It was the capital of the Lan Xang (million elephants) empire until the French arrived and used it as a summer retreat from their new capital of Vientiane. It still retains a good deal of its former glory. The riverside wats (or temples) are caked in gold leaf, colourful mosaics and elegant carvings, and the colonial old town is full of enticing alleyways, shops and restaurants.

Unforgettable are the neon-orange monks that are everywhere in this small town, the heart of Laos Buddhism. They can be seen strolling with black umbrellas, drinking tea on street corners and, once, squeezing themselves into a phone booth, as though in an effort to break some obscure Guinness record

A highlight of our stay in this monastic town was a trip to revered Pak Ou cave… and whiskey island! We set off in a small longtail boat, skimming through the early morning mist across the river until we pulled in at a wooden jetty beneath steep marble steps. After climbing the steps, we entered a small cavern. There we found a heavenly host of Buddha statues packed tightly. Tiny figures crowded every nook and cranny, their serene gold faces shining out.

However, on the other side of the mighty Mekong, away from pious incense burners, a village of distillers awaits. After clambering up a muddy path we were offered shots of free 'lao laos' rice wine poured form pottery jugs. By the time we reach the first 'distillery', an oil drum, we had to steady ourselves... in time for a mug of fresh stuff straight from the still. It tastes a great deal like hot sugary sake and quickly became an acquired taste.

As we made our way unsteadily back to our boat, good-natured hard-sellers pursued us with their wares. Our best buys were fisherman's pants – wrap-around pantaloons made from raw cotton, which are ideal for gardening or lounging, and last forever. That afternoon my wife and I decide to ascend forested ‘Mount' Phusi in the middle of town to visit the hilltop monastery. As we neared the summit, we came across a bizarre scene. Three young novice monks, none of them older than 12, sat behind a makeshift admittance booth – one reading a comic, one puffing on a cigarette and the other counting out money.

Inside, Monks drifted from prayer hall to shrine, tourists wielding cameras aimed and shot at the air and small bells tinkled in the breeze. From here, you can view the surrounding plain, the slow moving river and snatches of town, obscured by foliage. A monk, standing on an outcropping shielding his eyes from the sun, suddenly let out a cry and ran off. Puzzled, we looked around and spotted a tiny black shape in the sky, which materialised into a plane. Around the corner, we found eight monks sitting on benches, gesticulating and yammering as the plane flies past. Plane spotting seemed an incongruous pastime for monks.

There is much incongruous about Luang Prabang – foremost being the presence of astounding French food. One fine example is L'Elephant – which serves adventurous French cuisine and an alluring array of aperitifs. Patisserie and coffee can be found in several places including one that shows local artwork and photography alongside ceramics and craft pieces.

If you're a fan of textiles, jewellery or carvings, the market in the shadow of Phusi is hard to beat. The mountainous H'mong people make the most fantastic designs using swirling primal colours: red, white, and deep indigo blue. Striking silver neck rings, earrings and bracelets echo forest birds and clouds. Trays of drying paper scattered with richly coloured petals can be seen on many side streets. This local speciality is used for a variety of things; we especially loved the delicate lanterns available in the towns many boutiques.

I regret not having bought a bright tapestry of a local H'mong story I found there. Little stitches etched out the tale of a napping woodsman, and his dream of gloriously fighting a tiger hiding in the forest. Like that story, LP feels like a dream now, but its colours stand out brightly like the orange of the tiger's stripes, and the smoking monk's robes. For a relaxing, spiritually renewing, and unique experience, head for this town, the heartland of Indochina. You'll never forget it.