Moreover, while SOEs are not required to pledge collateral to borrow, non-state firms must come up with collateral to cover 130% of a loan. And land use rights, difficult enough to obtain by themselves, cannot be used as collateral.

"Land is a key issue," International Finance Corporation Vice President Assaad Jabre told State Bank officials while in Hanoi recently. "What can foreign and local lenders take as mortgage? It should be the same terms [for both state and private firms]."

In this environment, even the best ideas are often non-starters. "There are obviously a lot of skilled people in Vietnam," says one Western economist. "[The government] has got to get the incentives set up." And yet, part of the reason incentives are lacking may be that on a purely philosophical level, the government still appears uneasy with the idea of private enterprise.

There has not been a ringing endorsement of the idea by the Communist Party comparable to the capitalist battle cry "to be rich is glorious" made by China's party chief Deng Xiaoping. To further taint the atmosphere, private business got its heaviest review in state-run media in the past year with coverage of the convictions of executives of private sector giants Minh Phung, Epco and Tamexco for economic crimes.

This climate is a major reason why SMEs tend to keep a low profile. If there is a groundswell of private sector initiative, much of it is playing out behind the scenes, in corners of the economy overlooked by the state. Entrepreneurs have found opportunities by steering clear of the SOEs and the industries they rule.

"Why would I open a diamond-polishing factory?" asks Doan Van An, a businessman in Hanoi. "Because nobody else can do it. I bought the equipment from Thailand and diamonds from Russia through a Belgian company. How can the state compete with me on that?"

Distribution companies have also proven to be a good choice for small business people, he says. "Sons of big men think it's too small. 'How can I sell for someone else?' they ask. But we try to be small and simple." At least under present conditions, that is what works best.

"These guys are the pioneers," the MPDF's Davenport said of the top SMEs. "They have substantial assets tied up, they can't borrow from banks, and they're out ahead of the laws. But they're confident in their ability, like to do it their way, and have found an opportunity that will enable them to prosper."

Yet successful entrepreneurs still find they must decline some opportunities. "The road for business is still not good," says one entrepreneur. "I can go one hundred kilometers, but no more."