As Vietnam prepares to host the Asia Pacific Economic Cooperation summit later this month, it can boast one of the world's fastest growing economies and imminent membership in the World Trade Organization. Ten years after communist Vietnam's first wave of capitalist euphoria ground to a halt, the country is booming again. But some analysts warn that certain weaknesses could once again bring growth to a halt.

When Vietnam's new prime minister addressed the country's National Assembly in October, he had a lot to be proud of.

Nguyen Tan Dung

Nguyen Tan Dung says Vietnam has achieved its yearly targets in every sector and he forecast growth for the next year at more than eight percent.

Mr. Dung is not the only one to be optimistic.

Peter Ryder is CEO of Indochina Capital, which manages nearly $600 million in Vietnamese equities and real estate. He says foreign investors could not be more bullish on Vietnam.

"There's obviously enormous amounts of offshore interest. Domestic investment's way up. … No matter how you look at the economy, it's quite a rosy picture," he said.

Foreign direct investment exceeded $5 billion in the first nine months of this year and Vietnam's exports doubled between 2002 and 2005, to more than $32 billion.

Foreign companies are flocking to the country, with computer and office equipment manufacturers Intel and Canon among those to build factories here.

But some are cautioning Vietnam's government against too much exuberance.

Workers prepare a flower display in preparation for upcoming APEC summit in Hanoi

This is not the first time Vietnam has seen a wave of investor enthusiasm. Indochina Capital's Ryder was here in the mid-1990s, when it became clear investor expectations were unsustainable.

"…It was very quickly being touted as the next Asian Dragon," he said. "There was this very blank canvas with enormous human resource, natural resource, et cetera potential - that had utterly no infrastructure. Either physical or soft, as in banking systems, legal systems, finance systems."

As foreign investors realized how difficult it was to do business in Vietnam, many pulled out.

Pete Peterson, a former U.S. Air Force pilot who spent nine years as a prisoner of war in Hanoi, became America's first ambassador to Vietnam after relations were normalized in 1995.

He says Vietnam has made tremendous progress in structural reform, business laws and banking infrastructure are now far more sophisticated than a decade ago but problems remain.

"There is a huge deficit in transportation infrastructure. The rail structure is just pathetic," he said.

Many major exporters agree. In September, foreign companies with Vietnamese operations, including Nike and The Gap, warned the government they were running out of port capacity.

Exporters say by next year they could be experiencing significant delays, a critical problem in industries like garments and seafood.

Infrastructure improvements have been slowed by corruption. A huge scandal in Vietnam's Ministry of Transportation this year brought highway construction in the north to a virtual halt.

Vietnam's economy also remains dominated by huge state-owned firms.

Nguyen Hoang Luu, vice chairman of the Association of Small and Medium Enterprises, says the government is failing to promote small private businesses that are the true engines of growth.

Luu says government officials favor big state firms with credit and land, and harass small businesses with demands for bribes.

Scott Cheshier is an economist at the United Nations Development Program in Hanoi. He says problems occur when government companies, like Vietnam Post and Telegraph, or VNPT, both regulate and do business in the same industry.

"For instance, VNPT set regulations for the telecom sector and operated within those regulations it set," he said. "So there were conflicts of interest."

But Cheshier says the government is now moving to privatize state-owned firms as part of reforms mandated by Vietnam's entry into the World Trade Organization on November 7.

The country has had to stop subsidizing its textile industry, and its domestic gasoline prices. It is also having let even more foreign firms into Vietnamese markets.

Bui Hong Ky, 35, works for a Vietnamese express mail company, and is nervous about what new competition will bring.

"In the future when regulations change, a lot of forwarders, a lot of airlines or shipping lines, can join Vietnam," he said. "And at that time private companies can't bear with the difficulties."

But others are looking forward to the changes. Tran Duc Nghia is a manager at software company FPT, which has partnership agreements with Microsoft.

"When Vietnam accedes to the WTO, we think that we have more chance in order to work.," he said.

At the new Vincom Towers mall in Hanoi, signs of Vietnam's growing wealth are everywhere, from Benetton and Prada franchises to Vietnam's first full-fledged multiplex movie theater.

Phuong Dung, 23, a student at Hanoi's Foreign Trade University, is out shopping. Her optimism is typical of Vietnam's urban youth.

Phuong Dung says she's happy that her job opportunities are so much better than in her parents' generation. And she thinks Vietnam is only going to keep getting richer