Whatever you think you know about business in Vietnam, forget it. The economic and business environment in today’s Vietnam surprises most U.S. buyers that visit the country in search of low-cost, high-quality suppliers.

“My personal image—as well as those of most of my associates—prior to visiting Vietnam, was one of manufacturing facilities with dirt floors and sweat-shop type atmospheres,” says James Malch, senior supply chain manager for Pacific Scientific’s Electro-Kinetics division in Carpinteria, Calif., which buys alternator parts from Vietnamese suppliers. “But after visiting several different suppliers in various industries such as stamping, PCB assembly, machining, and wiring and harness assembly, I was very impressed. Once I was inside the building, I could not tell I was in a foreign country.”

Timothy Young, materials director and global sourcing expert for a Midwest maker of off-road equipment who buys castings in Vietnam, says his misconceptions were similar—that only low-skilled, low-tech companies were found in Vietnam.

“In fact, there are some very sophisticated and quality accredited companies in Vietnam,” Young says, adding that uncovering the truly qualified suppliers remains a challenge.

Young says another misconception is that U.S. businesspeople may not be well received in Vietnam. “In truth, the Vietnamese are very friendly and welcoming although the frequency of U.S. business representatives making routine visits is far from being on-par with visitors to China, for example.”

The level of misconception about Vietnamese businesses is recognized by Vietnamese firms. In a recent Business Week story on the high-tech industry in Vietnam, Charles Speyer, COO of Vietnamese software firm Glass Egg, noted that, “One disadvantage of being here is that some people think we work in rice paddies and little grass huts.” The story points out that Glass Egg’s 140 employees toil in state-of-the-art facilities just a mile from Ho Chi Minh City’s international airport in 'E-Town,’ Vietnam’s first high-rise dedicated to high-tech clients.”

Whatever the misconception, it’s clear that Vietnam is on the radar of U.S. and other Western buyers. It’s one of the fastest growing economies in Southeast Asia, with GDP growth averaging 6.8% in 1997-2004, launching to more than 8% growth in 2006, trailing only China in the region.

In the recent past, many Vietnamese companies were owned by the government and operated by ex-military officials who were given posts in the government. But that is changing literally as you read this. In January, Vietnam was officially accepted into the World Trade Organization and unveiled a plan to privatize more than 70 state-owned businesses, including several banks, in the next three years.

And even prior to that, Vietnam’s membership in the ASEAN Free Trade Area and entry into the U.S.-Vietnam Bilateral Trade Agreement in December 2001 led to changes in Vietnam’s trade and economic policies. According to U.S. government data, between 2000 and 2005, trade between the U.S. and Vietnam rose from $1.2 billion to $7.8 billion, a 550% increase.

In 2005, Vietnam’s exports to the U.S. reached $6.6 billion and for 2007, the country is looking to export a total of more than $47.5 billion of product out to the world, up a whopping 20% from $39.5 billion in 2006.

The high-tech industry is a prime example of the growth in Vietnam’s economy. According to an Associated Press report, in 2005, computer and electronic equipment exports from Vietnam rose 34% to $1.44 billion while imports of computers and electronics rose 26.3% to $1.7 billion. Chipmaker Intel announced in November it would triple its investment in Vietnam to $1 billion to expand the new chip plant it is building there. According to the Business Week story, when Bill Gates traveled to Vietnam in April he was greeted “like a rock star by some 7,000 students at Hanoi University of Technology,” a further indication of the country’s enthusiasm for all things high-tech.

However there are challenges to working in Vietnam, namely infrastructure and limited access to raw material in Vietnam. Most businesses manufacturing in Vietnam have to import raw materials for the manufacturing plants there from markets such as China, Japan or even Russia. Combine that with a limited physical logistics network (like many developing economies) and supply chain management may require a bit more planning in Vietnam than some other markets.

The business climate in Vietnam is similar to that of other Asian economies. Timothy Putman lives in Vietnam and works as manager of public relations and foreign investments at Southern Bank in Ho Chi Minh City. He says often suppliers in Vietnam have difficulty saying no and may over commit themselves to contracts they cannot fulfill.

Also, he points out that suggestions from lower-level businesspeople are often unwelcome in meetings where higher level executives are present. “Jobs and promotions in Vietnam are often based on family, not so much on professional merit,” he says.

According to the U.S. Commercial Service, the concept of “Face” is extremely important to many Vietnamese.

“It is very important to try not to put your Vietnamese counterparts in an embarrassing situation or one that calls for public back tracking. You should be careful not to cause your Vietnamese contact embarrassment in front of superiors, peers, or subordinates,” according to a U.S. Commercial Service guide to doing business in Vietnam.

Vietnam is a growing and young population. According to U.S. government sources, 60% of Vietnam’s population is under the age of 30 and born after the Vietnam War (or the “American War” as it is called there) ended.

According to “Vietnam’s Overall Plan for Developing E-commerce in 2006-2010” a plan approved by the government two years ago, some 60% of large firms in the country will be conducting B2B e-commerce by 2010.”

There are some distinct differences in the business climate of various regions of Vietnam, however. Perhaps one of the biggest issues that respondents to a recent Purchasing survey pointed out were the vast differences between the Northern regions like Hanoi, which tend to be slower paced, more bureaucratic and less industrialized, and Southern regions including Ho Chi Minh City, which tend to be more fast-paced and similar to Hong Kong and Singapore.

Robert Comper, president of North American sales at Guppy Plastic Industries in Folsom, Calif. has been travelling to Vietnam for more than a decade and says: “Hanoi is very bureaucratic and slow due to everyone being told what to do under a communist government. Ho Chi Minh City does not carry this baggage.”

Comper also points out that many companies in nearby countries such as Singapore, Taiwan and Malaysia have had joint ventures in Vietnam since the early 1990s. “Southern Vietnam has built several good packaging companies,” he says, adding that Southern Vietnam also has a stronger higher educational infrastructure and produces more qualified workers.

Getting around in Vietnam can be treacherous for non-Asians. According to Putman, “Traffic laws in Vietnam are a joke and the traffic police are even a bigger joke. Vietnam is not what one would expect a communist country to be.” Several other survey respondents said traffic in major Vietnamese cities can be daunting—and it’s expected to get worse as more Vietnamese people afford cars.

Bill Vachon, marketing manager for Stanley National Hardware in Sterling, Ill., points out that the “airport is not very well organized so plan to spend extra time there. While it is generally safe in the evening in most areas of Vietnam, travelers do need to pay attention to their surroundings as theft is a problem.”

Malch has been to Vietnam several times and has never exchanged money, as U.S. dollars are readily accepted in most downtown areas.

“And the food is delicious,” he says. “Be daring and try different items from the menu.”

Coffee and tea are extremely popular in Vietnam, so be ready to spend a lot of time in very busy sidewalk cafes.