said Minh. "And then growing people is even harder because we have a very limited pool of talented and experienced people. When you are able to grow them, they are going to be approached by so many others."
Despite those concerns, VNG is attracting interest, including a strategic partnership with China's Tencent, known for its online games, China's largest instant-messaging platform and foray into English-language products.
Henry Nguyen, managing general partner at IDG Ventures Vietnam, reckons VNG is still 5-6 years from its peak. Fueling his optimism is Vietnam's young population. Ninety percent are below or within the working age, according to United Nations data. To paraphrase former U.S. President Bill Clinton's 1992 campaign slogan, he said, "To us, it's the demographics, stupid".
Vietnam's middle-class has more than doubled in the past decade to 64 percent in urban areas, according to Asia-Pacific research consultants Cimigo. Sixty percent of the population is under 35 years old. The economy more than tripled to over $100 billion from $30 billion just a decade ago, along with per capita wealth, although off a low base.
LOOMING RISKS
But doubts are growing over whether authorities can pilot the economy deftly enough to turn Vietnam into Asia's next tiger.
Some signs are not encouraging, such as the Finance Ministry's decision to sign away proceeds of Vietnam's first international bond to state-owned Vietnam Shipbuilding Industry Corp, or Vinashin, in 2005, handing over all $750 million from the oversubscribed 10-year issue.
The arrangement was part of the Communist Party's plans to try to keep the state sector in control of the "commanding heights" of the economy by bankrolling the big ones, monopolising the sectors they operate in, and creating state-owned conglomerates modeled on South Korea's powerful chaebols.
Despite the huge sum, Vinashin's chief executive Pham Thanh Binh said at the time the amount was barely a quarter of the funds needed to reach its ambitious shipbuilding targets over the next five years, during which he expected 30 percent growth. So he sought more cash - from the government, the capital markets and foreign lenders.
Instead of focusing on producing more and better boats, though, Vinashin sprouted subsidiaries at an alarming rate, often in unrelated fields such as hotels, motorbikes and stockbroking.
Then the global economic downturn struck, sucking the wind out of the shipping industry's sails. Vinashin's debt problems were too big to avoid at some $4.4 billion by the middle of last year. The Communist Party declared the firm on the brink of bankruptcy and the government ordered it re-organised. Binh and other executives were sacked and later arrested.
Vinashin has become a prime example of the risks inherent in the government's industrial policy and has sparked heated debate within the party, according to sources close to the communist leadership.
The government ordered Vietnamese banks to freeze their loans with Vinashin to give it breathing room. But as the company drifted toward default last month on a $600 million loan by international creditors, all three ratings agencies downgraded Vietnam, raising the cost of capital when it critically needs to raise funds to improve infrastructure.
Such problems deepen Vietnam's macroeconomic troubles. Annual inflation hit a 22-month high in December of nearly 12 percent, the currency has lost nearly 25 percent against the dollar on the gray market since the end of the first quarter of 2008, and the International Monetary Fund said foreign exchange reserves had sunk to just 1.8 months of prospective imports by the end of September.
State-owned enterprises (SOE) have been sucking up capital and increasing risk in the banking system without producing big advances in economic growth and job creation.
"In the long term, it's just not sustainable what they're doing," said Jonathan Pincus, dean of the Fulbright Economics Teaching Programme in Ho Chi Minh City and a former economist for the United Nations in Vietnam.
"What's going to happen when the chickens come home to roost on Vinashin? I think they'll just run out of money. It's going to get very expensive for them to get debt and they're broke, so what happens if a couple of banks blow out? They're not China. They're not sitting on $3 trillion in reserves."
A study by Vietnam's Central Institute for Economic Management and the National Univerity of Singapore's Lee Kwan Yew School of Public Policy presented to the government last month showed Vietnam's incremental-capital output ratio, or ICOR, a measure of the efficiency of capital use, was actually worsening because of money poured into SOEs.
Vietnam's ICOR averaged 4.8 in 2000-2008 and 5.4 for 2006-2008, substantially less efficient than Taiwan, South Korea and Thailand during similar phases of development.
Yet the party seems as committed to the state sector as ever, a decade after enacting an Enterprise Law that opened the floodgates for private businesses. The result is a warped competitive environment that puts private business at a disadvantage.
CHALLENGES TO PRIVATE SECTOR
Examples are plentiful.
Jetstar Pacific, an airline partly owned by Australia's Qantas Airways Ltd , has had many setbacks in Vietnam, where the skies are dominated by flag carrier and SOE Vietnam Airlines. In April 2008, for instance, it had trouble securing deliveries of fuel from the state jet fuel monopoly, Vinapco, a company under Vietnam Airlines.
In the grocery store space, South Korean supermarket Lotte Mart, part of Lotte Shopping Co Ltd , opened its first shop in Ho Chi Minh City in 2008 but faced long delays getting approval to open a second in the city where home-grown and state-owned Saigon Co.op Mart has been eager to cling to its market share.
The excuse, said Fred Burke, a managing partner at international law firm Baker & McKenzie, was that it did not meet an "economic needs test" that Vietnam was allowed to retain under its 2007 World Trade Organisation agreement. In reality, he said, it was pure protectionism.
"The SOEs really do see it as their right to monopolise the market," Pincus said.
Big investments in the state sector squeeze the fiscal balance and exacerbate inflation pressures. More state spending, plus inefficient use of capital translates into less output per dollar and higher prices for goods. Preferred access to land and capital only make the problems worse.
Deputy Prime Minister Nguyen Sinh Hung has made privatising state enterprises a priority over the next four years after about 144 sold shares to the public last year. That's good news to Andy Ho, managing director and head of investment at VinaCapital, the country's largest private equity firm.
"We look at dilapidated, beat up companies where we can make a difference. We love the SOEs," he said. "We invest in a lot of businesses that cater to the consumer growth."
But Vietnam's war-scarred past poses unique issues for private equity. Years of war and communist central planning wiped out a generation of entrepreneurs. Big investments by overseas-backed funds are often accompanied by training for local CEOs or, if the state retains control of a newly privatised firm, extensive talks to convince bureaucrats to think of the bottom line.
"We sit down with them and say, 'there are certain changes you need to make to grow your business'." About 75 percent of the companies listen, said Ho, whose firm manages $2 billion of investments.
Mekong Capital's Freund, a Chicago native and religion scholar from University of California, Santa Cruz, runs classes for executives teaching them to think like Buddha.
"If I go in and say 'American management gurus say you should do this, and this and this', it is in one