The 40-year-old chair of the company wants Trung Nguyen, which produces and exports coffee and runs a well-established café franchise, to become the world's leading coffee brand. However, like other Vietnamese entrepreneurs who are keen to expand their business, he is suffering from a distinct lack of qualified senior managers.

"In a developing country such as Vietnam, the labour market cannot supply the appropriate leadership and senior management for a fast-growing company like this," he explains from his office in HCM City. "One of the key reasons we established our international office in Singapore was to help us source international-standard management."

A shortage of well-qualified managers and technicians is just one of many challenges for investors in a frontier market such as Vietnam.

It has been growing rapidly over the past two decades, as the country has moved from Soviet-style central planning to a more market-orientated system. Persistent macroeconomic instability, poor infrastructure and widespread corruption also make this a tough place in which to do business.

The economic climate is difficult in the short term, with high inflation, large trade and budget deficits, as well as financial problems at state-owned enterprises continuing to weigh on investor sentiment.

The government has unveiled a package of fiscal and monetary tightening measures designed to stabilise the economy. If it can stay the course and drive through much-needed reforms to the bloated state sector, most analysts expect the economy to carry on growing solidly over the next few years, if perhaps not at the rate of 7 per cent and more that it achieved before the global financial crisis.

With a young population, favourable geography (Vietnam hopes to act as a "bridge" between China and the rest of south-east Asia) and one of the fastest-growing middle classes on the continent, the country has significant potential for tenacious investors with a long-term game plan.

The ebullient Vu is one such investor, hoping to double revenues at Trung Nguyen this year, despite the economic turbulence.

"We're now in the middle of an economic crisis, but we predicted this three years ago," he says. With commercial lending rates having risen above 20 per cent a year following big interest rate increases by the under-pressure central bank, the company has already secured the necessary short-term funding, he adds.

Like other consumer-focused companies, Trung Nguyen has profited from the rapid expansion of the Vietnamese middle class, which is one of the fastest growing in Asia, according to the Asian Development Bank.

Pham Nguyen Foods, a family-owned business that makes cakes and snacks, has also been thriving on the back of increasing levels of disposable income. Having started life as a family outfit 20 years ago, Pham Nguyen now employs 1,100 people, generates domestic revenue of $25m and sells 350m packets a year of its trademark Phaner Pie, a marshmallow-filled bun with a chocolate coating. And it is still growing fast, according to Christian Leitzinger, a former investment banker who was recently appointed as the company's chief operating officer.

When the founding family's second generation took over the business, they decided to revamp the recruitment policy, bringing in a number of experienced foreigners and locals to key positions.

As a result, sales jumped 40 per cent in six months and exports doubled in just one quarter to 15 per cent of total revenue, says Leitzinger.

While a number of Vietnamese consumer companies have built recognisable domestic brands, many struggle to succeed when they expand overseas.

"Local companies wishing to grow their export revenues need to invest heavily in marketing, strategy, packaging and language skills," says Leitzinger. They also need to be adaptable.

Pham Nguyen, for example, developed a new, vegan chocolate pie, which was very difficult to produce, in order to boost its chances of success in India.

In an economy that is still dominated by a clunky state-owned sector that gets favourable access to credit, land and licences, nimble, privately owned companies tend to stand out.

There are only a handful of listed, "blue-chip" companies of the sort that might get a second look from foreign investors. Vinamilk, the dominant milk producer, Kinh Do, a confectionery maker, Masan Group, a conglomerate that does everything from producing fish sauce to mining tungsten, and Hoang Anh Gia Lai, a property developer that recently completed a secondary listing in London, are among the best-run companies, say local fund managers.

Vietnam moved up 10 places in the World Bank's 2011 global ranking on the ease of doing business-to 78th out of 183 economies. But levels of transparency and disclosure still trail behind developed markets, particularly outside the top few listed companies.

The International Finance Corporation, the private sector development arm of the World Bank, concluded in its most recent review that "corporate governance in Vietnam is at the rudimentary stage and ripe for improvement". The IFC noted that "corporate governance practice in Vietnamese companies is more driven by compliance with regulatory requirements than commitment to a higher practice of sound governance".

As in many Asian countries, corporate culture is based on personal relationships. It is not always easy for businesses, especially those backed by foreign investors, to maintain good relations with local and central government officials, who are steeped in the secretive ways of the ruling Communist party. But it is a prerequisite for success in this one-party state.

"It is challenging to establish relationships that work within a system that is still in its infancy," says Anthony Jolly, director of Midway Metals, which makes export-quality stainless steel for yachts and kitchen fittings at a factory 30 miles south of Hanoi.

As a foreign investor, you may find it easier if you go it alone to ensure that your business is run properly and quality standards are upheld, he says. "But if you have no local connections or relationships, your progress will be stifled."

Six years after it set up in Vietnam, Midway employs 90 people. Jolly hopes to increase turnover to $5m in 2012, up from $2.5m this year.

The secret of his success is his wife, he says. "She is Vietnamese and she has been in the business with me from the start. If you do not have Vietnamese eyes, your investment will probably be down by 30 per cent from the beginning."

With a fast-growing domestic market and a cheap labour force-average factory workers' wages of about $100 a month are around a third of the level in southern China-other small and medium-sized businesses are looking for opportunities here.

But Jolly urges them to be careful. "If you are an SME wanting to invest, you have to do a huge amount of due diligence because there is a lot of murky water and it can be hard to figure out what is going on," he says. "My advice is to consult experienced expatriates who have been here for more than 10 years."

Leitzinger agrees that those who simply move western executives with little regional experience into the country and try to apply models from abroad will probably fail. "Foreigners cannot come in here and expect to be as effective and get the same return on investment as they would elsewhere," he says.

Likewise, local companies looking to go global need a more international perspective, says Vu, who has brought in Bain & Co, the global management consultancy, to help him achieve his grand vision for Trung Nguyen. "It is critical to choose partners who share your vision and philosophy and will stick with you for the long term," he says.

By Ben Bland - The Financial Times - June 9, 2011