It is not just this famous upmarket label which is setting its designs on the communist country.

Last week, fashion label Burberry pinpointed Vietnam as one of the new emerging centers of mass affluence and luxury carmakers Rolls-Royce and Porsche are beginning to make inroads into the rapidly changing country.

"The middle class is growing so quickly," says Pham Ngoc Bich, a businessman who was born in Vietnam and left to spend a number of years working for Canadian banks and asset managers before returning home.

"Ten years ago, there were many bicycles. Five years ago, there were many motorcycles. Now a lot of cars are imported. The value of cars imported in the past five months was 70 percent higher than the year before."

Vietnam has been undergoing a dramatic transformation.

The tragic death toll during the Vietnam War, which ran into the few millions, has left the country with an exceptionally young demographic profile. In a nation of 86 million, the median age is just 26.

It is this young age group that has helped fuel Vietnam's economic growth, and the past year's GDP of 8.5 percent. Many emigrants, or Viet Kieu, leave the country to study overseas and send money back to invest in property, while others are entrepreneurs, such as David Thai who set up Starbucks equivalent Highlands Coffee.

Vietnam has also become the world's leading producer of coffee, pepper and cashew nuts, and is a major rice and seafood exporter.

But this booming economy is showing increasing signs of coming under stress. Soaring food and commodity prices have caused inflation to surge to 25 percent - a 16-year high.

The country is also suffering from high energy prices as, although it is the third-largest oil producer in Asia, it has no refinery so all its fuel for planes and motor vehicles has to be imported.

Vietnam is further being hit by the weak dollar, which it accepts alongside its official currency, the dong. Market sellers and cyclo bicycle taxis are aware of the economic changes, demanding payment from tourists in the local currency and spurning the sinking dollar.

It is not just the locals who are complaining about the impact of the dollar and high inflation.

Ratings agencies are becoming cautious and Vietnam's main stock index, which had risen more than fivefold over the past four years as investors were drawn by economic growth averaging 7.5 percent since 1990, is showing signs of weakness.

The Ho Chi Minh Stock Index is now at its lowest level in 27 months, having fallen by almost 60 percent this year.

Property prices, after soaring over the past few years, have tumbled by 40 percent in the past five months as credit- conscious banks have reined in mortgage lending.

Merrill Lynch believes that this stock market slump could continue as the government may raise interest rates from 12 percent to quell inflation. However, there are some who reckon that this is just a blip.

John Hutton, Britain's Secretary of State for Business and Enterprise, is among those arguing that there will be further growth in the country.

This week, he became the first UK trade secretary to visit Ho Chi Minh City and called on British companies, especially oil and financial businesses, to look East, saying there will be "major opportunities."

THE DAILY TELEGRAPH