Good Morning, Vietnam

"This is a good time to be a financial journalist in Vietnam," confided Le Tan Phuoc, chief executive officer of Searefico, a publicly held company that specializes in industrial air-conditioning systems.

We were in the midst of a nine-course Chinese lunch at the glistening New World Hotel Saigon in Ho Chi Minh City. My mouth was filled with course No. 2 (braised shredded abalone soup with dried seafood), and my eyes were on course No. 3, deep-fried crab with tamarind sauce. Le continued, "They're all making money in the stock market. See, they get information from their friends and people they know in government, or in the companies, and then they trade before everybody else knows about it." I stifled a spit-take and nodded sagely.

As a connoisseur of bubbles, I'm always on the lookout for signs of unsustainable economic trends at home and abroad. A recent trip to Vietnam and Cambodia, as part of a German Marshall Fund of the United States economic journalism fellowship, provided food for thought. Having embraced the free market in 1986, the country of 85 million is rushing headlong into the global economy. Everywhere you go in Hanoi and Ho Chi Minh City, somebody is selling something. Women wearing bamboo hats squat on the sidewalk, selling tangerines, bananas, live eels, a single fish. The energy is palpable. Jogging in the September 23 Park in Ho Chi Minh City, I weaved through groups of women exercising with fans, mixed groups playing badminton without nets, a group of teens playing hacky sack with a shuttlecock. Such bourgeois pursuits evidently meet with the approval of the ubiquitous Ho Chi Minh, who looks down on modern Vietnam from the currency, from walls in corporate boardrooms, government offices, and stores. Set against a red background, he's always smiling, grandfatherly, with white hair and a wispy white beard. As I completed my circuit in the park, I looked up to see another huge image of a smiling grandfatherly figure, with white hair and a wispy white beard set against a red background: Col. Sanders on a gigantic KFC billboard.

Vietnam seems on the boil, like the pots at the ubiquitous pho stands. (Idea for franchise: Best Little Pho House in Saigon.) For the last few years, the economy has grown at an 8 percent clip. Through the first three quarters of 2007, domestic private-sector investment was up 28 percent, and foreign direct investment rose 38 percent. Earlier this year, Vietnam formally joined the World Trade Organization. The stock market is booming. At the end of 2005, according to the World Bank, 41 firms with a combined market capitalization of $1 billion were listed. At the end of September, the Vietnam markets claimed 206 listed firms with a combined capitalization of $22 billion. The percentage of citizens living on less than $2 a day has fallen from 63.5 percent in 2000 to about 33 percent this year. "We have been totally able to alter the face of our country," said Deputy Prime Minister Pham Gia Khiem.

The recent history is at once inspiring and bewildering—yet another former Communist country wholeheartedly embracing Western-style capitalism, providing the United States with a source of cheap labor and a new potential market for growth. But as shown by the blasé attitude toward insider trading, Vietnam's free-market capitalism is a somewhat different creature than the U.S. version. And the differences are enough to give a visitor pause about the sustainability of Vietnam's boom.

The checks and balances that help U.S. markets function well (the subprime debacle notwithstanding) aren't yet in place. Many of the publicly held companies are controlled in part by the government. I asked the CEO of Searefico whether his company enjoys any advantages because of its government ownership (the state has a minority stake). The company can borrow money from state banks at favorable interest rates without having to put up collateral, he conceded. Yet his answer was a definitive "no." The financial press is free, we were told, but journalists generally have to clear information with the government and the companies before they run it. A manager of the Vietnam Investment Review, a publication of the state Ministry of Planning and Investment, asked me if the U.S. government tells Newsweek how many ads to run every issue.