Fine palace, outside demolished, in republic (5)
I believe the answer is:
nepal
'republic' is the definition.
(I know that Nepal is a republic)
'fine palace outside demolished' is the wordplay.
'outside demolished' indicates the answer is hidden within the clue (letters outside the answer are removed).
'NEPAL' is hidden within 'fine palace'.
'in' is the link.
(Other definitions for nepal that I've seen before include "mountain state" , "Country in the Himalayas, capital Katmandu" , "mountainous area" , "somewhere in Asia" , "Asian kingdom" .)