Foreign investors flooded into Vietnam in the early 1990's, betting that the communist nation's "doi moi" economic reforms could make it the next Asian tiger economy. But by the late 1990's, the investors were pulling out almost as fast as they had come in. Doi moi, which means "renewal", was seen as too slow moving, and investors turned their attention to neighboring China.
Yet, in the past five years, Vietnam's cautious policy on reforms has quietly yielded results. Annual GDP growth has averaged nearly 7 percent a year. Poverty, which once plagued two-thirds of the population, has been cut in half. Average income for Vietnamese has doubled in the last 10 years.
Klaus Rohland, country representative for the World Bank, says those numbers are impressive by any standard.
"Vietnam is a major success story. As of 1992 until now, they have grown on average, by more than 6 percent," he said. "Last year they grew by like 7.5, 7.8 percent. And that is way above average growth. And it's probably, with the exception of China, the best performing economy in the world.
For all its success, Vietnam remains a poor country. Average income may have doubled, but it is still only about $600 a year - far behind wealthier neighbors like Thailand and Malaysia. Still, the mood is optimistic.
In Hanoi and Ho Chi Minh City, the sound of construction has become almost constant. Property prices have jumped by more than half in the past three years, as just about everyone seems to be renovating houses and building new office buildings. Real estate experts say office space in Ho Chi Minh City now costs the same as in suburban Tokyo or Paris.
Much of Vietnam's newfound prosperity comes from commodities exports like oil and agricultural products. The International Monetary Fund says Vietnam is the world's largest pepper exporter, and the second-largest exporter of rice, coffee and cocoa. Tourist arrivals reached three million visitors last year. That is only about a quarter of the tourists that Thailand welcomes, but is still up 50 percent from just three years previously. Nguyen Thanh Huong runs a souvenir shop in Hanoi's busy Hang Gai Street.
"Around late winter and early spring, there are many tourists Vietnam. Business is very good and I have a lot of customers," he said.
Economists say Vietnam still has a long way to go before its economy can match its more developed neighbors. Its expected entry into the World Trade Organization later this year could help. But first the government must further reform its banking and investment sectors - which now lend most of their funds to money-losing state-owned companies instead of private entrepreneurs.
Still, even foreign investors are beginning to regain confidence in Vietnam. This year's foreign direct investment is up by 30 percent. As the Communist Party touts its 30-year-old victory in the Vietnam War this week, Vietnam's economy gives the country something else to celebrate.
