(FORTUNE Magazine) – We were awakened at dawn by the strains of "White Christmas" broadcast over Saigon's Armed Forces Radio station--the signal to evacuate. "This is it," confirmed the U.S. embassy. "Everybody out!" Correspondents and photographers poured out of the Continental Palace Hotel onto the empty square in front of the old French opera house--a ragtag army, lugging typewriters, shoulder bags, television cameras, and sound gear. There was no question that this formation represented the final departure of Americans from the Vietnam war.

For the next 15 hours on that sweltering April 29, 1975, lumbering Sikorsky helicopters packed with evacuees shuttled back and forth from the embassy roof and the parking lot at Tan Son Nhut air base to a U.S. Navy flotilla cruising off the coast.

When I finally reached the air base on the western edge of the city, pillars of black rose from the hangars. Seconds later, a tremendous explosion shook the ground as a North Vietnamese shell hit the terminal building where we were supposed to await our turn to fly out.

Hundreds of U.S. flak-jacketed Marines, lying prone on the ground, ringed the helicopter pad. They were hard to see because their camouflaged uniforms blended with the tropical greenery. I almost tripped on a rifle barrel poking out from under a bush as I raced for one of the Sikorsky Sea Stallions, its ramp down and its rotors slashing the air impatiently.

With a dozen of the 60 passengers still standing like subway straphangers, the giant helo lifted off. Tilting and swaying, it gained altitude. Saigon lay below, brown and smoking in the late afternoon light, its serpentine river cutting a wide swath through the besieged city. "That's the last time I'll see Saigon," I said to myself.

Cruising down that same river on a chartered motor launch a few weeks ago, I wondered if I were dreaming. It wasn't simply the strange sensation of being back 25 years later in this teeming metropolis rechristened Ho Chi Minh City. It was the sight of five American executives standing on the fantail of the 40-foot launch, all formally attired in starched shirts and silk ties, implausibly puffing Havana cheroots, sipping wine, and reciting stanzas from Robert W. Service's Yukon ballad, "The Cremation of Sam McGee." Was this bizarre scene being staged for some Hollywood movie?

"We do this periodically to keep from getting too stressed out," explained Chris Tragakis, the local manager for American International Assurance and a charter member of this little literary group of expats that calls itself the Cigar & Poetry Society.

A former rifle platoon leader with the 35th Infantry Division, Tragakis was wounded at Pleiku in 1966. Now 56, he is starting his second post-war stint in Saigon, recruiting agents to peddle insurance policies for AIA. "My wife's a real trouper," he said. "But she thinks we're crazy coming back here to live."

Well, maybe not so crazy. Saigon today is a city of excitement and promise. And by almost any measure, a much more prosperous place than it was 25 years ago. During the war American soldiers, sailors, and Marines pumped hundreds of millions of dollars into the economy, but a lot of that money went for drugs, booze, and prostitutes. All of those things are still available, but less openly and far less abundantly. Now the foreign money is building roads and offices, opening factories, and pouring into high-tech firms. The people are better dressed. And since Saigon's citizens can be seen constantly snacking on rice or noodles out on the street, obviously better fed. Per capita income in Saigon is $1,200--only about half of what it is in Shanghai, for instance--but light-years ahead of where it was in 1975.

Until now Vietnam has depended mostly on oil and rice exports. But the country, whose $28 billion economy is roughly the size of Kuwait's, is turning more toward retail trade, tourism, and services. Yet not all is well. Since 1995, the annual growth rate has fallen from 9% to 3%, and exports and foreign direct investments have lagged.

What's to blame? Westerners point to the Communist bureaucracy, which has been churning out red tape, keeping the country's capital markets closed, and dragging out privatization. "The trouble is that the old revolutionary leaders in Hanoi, who spent years fighting capitalism, are still in control," said 63-year-old attorney Sesto Vecchi, the senior member and chief muse of the Cigar & Poetry Society. "They see the turmoil in Russia and fear for their own country's stability during the transition to a market economy."

Saigon, though, is doing its best to thrive despite the hard-liners in Hanoi. Its economy has now reached 30% of Vietnam's GDP. The magnetic pull of this slightly seedy former "Paris of the Orient" is its vibrant energy and unabashed entrepreneurial spirit. Never mind the peeling paint and cracked facades on the old French residences and government buildings. A sprinkling of glitzy new hotels with sky bars and rooftop swimming pools, together with a few gleaming steel-and-glass office towers, sprout from the center of town.

And down on the crowded streets, where shops bulge with watches, cameras, TVs, VCRs, karaoke players, and other imported luxuries, all five million official residents--plus a million or two more from the impoverished countryside--seem to be in perpetual motion. Vietnamese men dressed in Western business suits hurry in and out of offices with cell phones clamped to their ears. But the women, even secretaries and hotel clerks, tend to stick to the traditional ao dai (pronounced "ow yai"), a formfitting silk dress with a skirt that is revealingly split on each side up to the thigh.

Day and night, exhaust-belching motorcycles buzz down every thoroughfare like swarms of angry bees--well over a million Honda Dreams and assorted other models. Joining the stampede are bicycles, pedicabs, a few taxis, and an occasional bus, although public transportation is almost nonexistent. For the newcomer, just crossing from one side of the street to the other is a life-threatening experience. The trick is to walk slowly and steadily ahead as if fording a swift river, letting the traffic swirl around you.

Strolling along the sidewalks is just as hazardous as it was 25 years ago. Legless beggars, shoeshine boys, mothers lugging sleeping babies, and tiny barefoot flower girls pluck at the skirts and trouser legs--and heartstrings--of passing tourists, selling everything from postcards and chewing gum to copies of The Quiet American, Graham Greene's novel about Saigon in the 1950s. "Why not?" they wail when you spurn one of their offerings. "How about this?" they ask, hopefully proffering another item, all the while showing off the rudimentary English that has supplanted Russian as the foreign language taught in Saigon's public schools.

A number of famous landmarks remain from the old days. The 120-year-old Continental Hotel (though it dropped "Palace" from its name) looks pretty much the same as it did when our Time magazine bureau occupied a second-floor suite. But the elevated outdoor cafe known as the Continental Shelf, where correspondents collected rumors and traded war stories, has been glassed in and converted to the Ristorante Venezia. The hotel's new Bamboo Bar features a B-52 cocktail (Bailey's Irish Cream, Kahlua, and Grand Marnier, set aflame), an ironic name for this lethal concoction, considering the damage done to Vietnam by America's B-52 bombers.

Unchanged is the ornate old Rex Hotel where JUSPAO (Joint U.S. Public Affairs Office) spokesmen gave their afternoon war briefings, dubbed the Five O'Clock Follies. And the pomelo salad served at the Rex's rooftop restaurant is as tasty as ever.

The Presidential Palace, which Ho Chi Minh's tanks smashed their way into the day after we left Saigon, has been renamed the Reunification Palace. It looks the same but is now a museum. I found it eerie visiting the office where I had interviewed President Nguyen Van Thieu in 1975 shortly before he fled. The rumor had spread that he'd already shipped a planeload of gold to Paris to take care of his retirement. Yet as I stood behind Thieu's now-clean desk, his pledge--"I will not resign"--resonated in my head.

The main palace attraction--for visiting schoolchildren, at least--is the needle-nosed American F-5 parked on the front lawn, which renegade South Vietnamese pilot Nguyen Trung Than used to bomb the palace three weeks before Saigon fell. He then flew north to a hero's welcome in Hanoi and today pilots Boeing 767s for the national carrier, Vietnam Airlines.

Missing from the old Saigon scene is the half-block-long, boxlike American embassy, now just a hole in the ground. But it will long be remembered for the surprise Lunar New Year attack in 1968, during which 19 Viet Cong commandos shot their way inside the grounds guarded by U.S. Marines and Army MPs. All of the VC were killed, as were five of the American guards. But photographs and television footage of that stunning blow--more than any other event in the war--made Americans back home question trying to defeat an enemy that was often invisible until he opened fire. The attack's organizer, General Tran Bach Dang, now a frail 74 but still peppery as ever, lives in a beautifully landscaped Saigon villa.

"This place used to belong to your diplomats," he said through a translator. "I lived next door and observed all their comings and goings." He then described how he had smuggled 10,000 civilian-clad troops into Saigon for simultaneous attacks not only on our embassy but on numerous other key installations as well.

"Do you still bear any animosity toward Americans?" I asked. "We have a saying," replied the former VC commander. "If your enemy falls off his horse, you stop fighting."

Today, "VC" in this commercial hub--where half the population wasn't yet born in 1968--stands for venture capitalist, not Viet Cong. In the early 1990s investors from China, Taiwan, Korea, Japan, and Singapore poured into Saigon. And in 1994, when the U.S. lifted its embargo on Americans' operating businesses in Vietnam, they too joined the surge of investors seeking factory sites, government construction contracts, and import licenses.

"During the first boom years you couldn't get into this town with a shoehorn," says Michael Cole, a 35-year-old Minnesotan who started two magazines--one on sports, the other on housing--in Saigon. Both failed. "Everybody figured Vietnam was going to be Asia's next Young Tiger." Instead several big companies, including Reebok, have pulled out--although its chief competitor, Nike, followed its famous slogan, "Just do it," and has grown into Vietnam's largest employer. Its 42,000 workers are now spread over five shoe and apparel factories, numbers the company hopes to double. Because jobs are so scarce, fewer than one out of 200 workers quit each year.

"Bringing business to a place like this is the best way to lift up its people," says Lalit Monteiro, Nike's 33-year-old general manager in Vietnam. In one respect he's right. The average pay of a Nike worker is $53 per month, twice that of most government officials.

But the cause of the country's slump is obvious. The leaders in Hanoi are obsessed not only with maintaining economic stability but with keeping control. They also fear that too many foreign investors could endanger the country's independence. As one American official put it, "Instead of worrying about the precipitous drop in the country's growth during the past five years, they put their hand on the Ho Chi Minh book and pledge allegiance."

There's a joke circulating in Saigon. Question: "What has the Vietnamese government succeeded in doing that the U.S. couldn't?" Answer: "Defeat the Vietnamese people."

As a result of this leadership paralysis, few of the promised reforms have been implemented. Only 280 of the 5,500 outmoded state-owned companies have been privatized. One of the clearest cases of government paralysis involves the decision on where to locate the country's first oil refinery. The obvious place is the coastal city of Vungtao, near the offshore wells and only 60 miles downriver from Saigon, where gasoline consumption is heaviest. Yet the leaders in Hanoi insist on building the refinery in central Vietnam because unemployment there is so severe.

Corruption, which severely hampered the American economic-aid program during the war, is again rampant. In January a new Enterprise Law was passed, abolishing the need for 84 business licenses. However, the various licensing authorities still insist on being paid their fees under the table. Occasional government crackdowns don't seem to deter such demands. Last year the customs office in Saigon was closed for three weeks because all of the officials who could sign papers were temporarily in jail.

After being away from Saigon for so long, I was excited at locating a Vietnamese gentleman whom I knew in the old days. Nguyen Xuan Oanh--or "Jack Owen," as we Americans used to call this Harvard-trained economist--served briefly from 1965 to 1966 as South Vietnam's acting Prime Minister. Now 80, he is still working full-time as a business consultant with an impressive list of international clients, including R.R. Donnelley, Conoco, and Mobil.

His personal success doesn't seem to have been impeded by the Communist regime. Yet he complains that Doi Moi, the government's policy of economic renewal that he takes credit for suggesting, is being implemented too slowly. He also laments Vietnam's refusal to sign the trade agreement reached with the U.S. last year. "That pact," he says, "would open American markets to billions of dollars of Vietnamese products."

The party chiefs in Hanoi may be dragging their feet, but those in Saigon recognize the need to break through the bureaucracy and attract foreign investors. "They're more switched on here," says lawyer Vecchi, "more attuned to the need for foreign capital." Their tastes and habits, I discovered, are also more Western. Many of the local Communist leaders are avid golfers.

One Sunday, or so a story goes, the Party Secretary in Hanoi was urgently trying to reach Vo Viet Thanh, the popular and efficient chairman of the People's Committee (equivalent to mayor) in Saigon. He called Thanh's office several times. No answer. He called Thanh's home. No answer. Finally, he reached Thanh on his cell phone.

"Where are you?" demanded the Party Secretary.

"Playing golf," answered Thanh, who likes to take his hard-working staff out for a little Sunday relaxation at a new 36-hole course designed by Lee Trevino.

"Golf! That's a bourgeois game!" snapped the Party Secretary.

"Yes," replied Thanh. "But I could be out drinking with prostitutes at a karaoke bar, like many other government officials."

"Keep on playing," said the Party Secretary.

Tran Ngoc Chau, deputy editor of the English-language Saigon Times, believes that the Vietnamese people are beginning to look impatiently at the rapid development in the other ASEAN countries. "They fear we won't be competitive anymore--that all we will provide is cheap labor," he says. Having gone through a Communist reeducation camp, Chau knows better than to express those views in print. "There is no censorship," he explained. "But to obtain a publishing license, newspapers have to promise to support all government policies."

Reeducation, though not the kind imposed by the Communists, is desperately needed to develop a cadre of modern managers. A valiant step in this direction is being taken by the Fulbright Economics Teaching Program, named after the late U.S. Senator, an outspoken opponent of the Vietnam war. Housed in a cozy little campus tucked away on a Saigon side street, the one-year school is patterned after the Kennedy School at Harvard, explains dean Brian Quinn. "Most of the students come from provincial governments. Some didn't even know how to turn on a computer. Our goal is to develop their analytical skills so they can be more effective decision-makers when they go back to their jobs."

Although homegrown managerial talent is lacking, I found several American executives in Saigon who are deeply committed to aiding Vietnam's recovery. "I keep feeling I should go home and get started on a real career," says 32-year-old Andrew Fitanides. "The trouble is that I'm fascinated by what my company is doing here." An MBA from Columbia University and a former Peace Corps volunteer in Africa, he blew into town as a tourist eight months ago. Much to his surprise, he was snapped up as a marketing specialist by Taiwan's Phu My Hung Corp., which is carving out a whole new city for one million people called Saigon South. Designed by Skidmore Owings & Merrill, it has its own thermal power plant, an export-processing zone for 96 factories, a golf driving range, and an amusement park with a gut-wrenching loop-the-loop. "Sure, I'm envious of my classmates making millions down on Wall Street," says Fitanides. "But for a kid from rural Maine, it's exciting watching a city grow from scratch."

William Brown, a seven-year resident, represents the National Bank of Kuwait, which besides its multimillion dollar investments in Vietnam is also making $50 and $100 loans to farmers and tradesmen. "I feel good when I see how money for a mere pig or sewing machine can launch a small business here," he says. The Browns own homes in Hawaii and New Mexico. "Who wants to retire?" the 57-year-old adds. "Those places are for later."

Frederick Burke, the managing partner of the international law firm Baker & McKenzie, is another American who plans to stay in Saigon indefinitely. "When I negotiate a contract," he explains, "and then see the factory go up and the workers go in, I get a wonderful feeling of accomplishment." Burke also doubles as singer and guitar player with the Midlife Crisis, a rock band doing Saturday night gigs at Saigon's hottest nightclub, Apocalypse Now. "Strange, isn't it?" he says. "As a Stanford undergrad I was an avid anti-war protester. I thought Americans should get out of Vietnam. Now it's my home." Shared, he adds, with two dogs and a parrot.

One of the biggest infusions of managerial talent is coming from Viet Kieus, or VKs, as the overseas Vietnamese returning from abroad are called. (Kieu literally means "bridge"--in this context, Vietnam's connection to the outside world.) Pham Xuan Ai, the effervescent vice director of the Institute for Economic Research, said, "The idea is to encourage more VKs to invest."

"But will they?" I asked.

"Yes, yes," he nodded vigorously. "But first we have to streamline the government, streamline the legal system, streamline the economy, streamline everything!" I assumed "streamline" is a word used liberally at the Kennedy School, where he spent a year.

Many of the Viet Kieus return not only with money and talent to invest but with interesting tales to tell. Huynh Trung Tan, or Alain, as this Vietnamese-born French citizen calls himself, emigrated to California in 1970. After opening two successful French restaurants--La Tour in Palo Alto, followed by Au Chambertin in Los Angeles--he came back to Saigon in 1989, primarily to search for a missing sister. (He never found her.) Now 47, he is part-owner of four upscale Saigon restaurants aimed at the tourist trade and is launching a chain of fast-food noodle shops called Pho 2000. Taking a cue from McDonald's (which hasn't yet ventured into Vietnam), he says, "Our menus, decor, uniforms, and especially the quality of the food are all the same." His first three noodle shops are booming, each dishing up some 600 steaming bowls a day. "I'd like to open 15 or 20 more," he says, "but there are no franchising laws, and in Saigon there's no such thing as a long-term lease."

A thriving software firm, PSV (Paragon Solutions Vietnam Ltd.), was launched in 1995 by a pair of Viet Kieus, both of whom fled Vietnam in small boats. Tai Pham, the 42-year-old CEO who now runs the parent company in Chicago, was studying to be a Catholic priest before escaping in 1980. He and 26 shipmates--four of whom died for lack of food and water--were finally picked up by an Exxon tanker after 17 days at sea. Co-founder Cang "Sean" Mai, 31, who is in charge of the Saigon subsidiary, survived 21 days at sea (he was 10 at the time). Three in his boat died before the destroyer San Jose came to the rescue.

PSV specializes in Internet software with telecommunication and e-commerce applications. The company started with ten young engineers recruited from the Ho Chi Minh City University of Technology. As a subcontractor for Raytheon, Lucent, and several other American companies, it now employs 150 engineers, and is doubling in size every year. "What's so amazing," says Mai, "is the cooperation we're getting from the Vietnamese government. High-ranking officials from Hanoi keep dropping in to see how they can help. Even the 86-year-old war hero General Vo Nguyen Giap stopped by." Mai believes they are intrigued by the $6 billion in software sales racked up by India last year. "I think they are looking to replicate that here," he says.

Another VK is Pham Xuan Vinh, a rising 31-year-old architect. He, too, was lost at sea with a group of boat people. Worse yet, they were attacked by pirates, who took everyone's jewelry and raped one of the girls. "But then," recounts Vinh, "they gave us water and pointed us in the direction of Thailand."

After spending two years stuck in a Thai refugee camp, he was sent by missionaries to Jackson, Miss., where he attended junior college and then architecture school. Finally, in 1994, he returned to Saigon and joined the Australian firm Denton Corker Marshall as a building site developer helping to design the 28-story Saigon Center. "It was a combination of nostalgia and a desire to do something meaningful that brought me back," he explained.

My own most nostalgic moment in Saigon this spring came during an emotional reunion with Pham Xuan An, the only Vietnamese reporter to have worked for Time magazine during the war. He was a good friend and still is, although as his boss I suspected his loyalties were sharply divided between the magazine and his country. In recent years he's been hailed in the Vietnamese press for his patriotism, proof, I believe, that he'd been passing information gathered by Time correspondents to the Viet Cong. To his credit, though, he never fed me misinformation or misled our correspondents on the progress of the war.

We met at Givral's, a combination coffee shop, bar, and rumor mill across the street from our former office in the Continental Hotel. Gaunt, gravel-voiced, and intense as ever at 72, he seemed the same old An, full of information about local politics and the state of the economy.

I reminded him that as we walked together out of the Continental Hotel on that fateful day in 1975 and sadly said goodbye, his last words to me were "Don't worry. You'll be all right."

"Did you know then," I asked him, "that the North Vietnamese army wouldn't enter Saigon until the next day?" An didn't respond. Only much later did I realize the answer was clear. He knew.

We also talked about his son, who is attending law school on a Fulbright scholarship at the University of North Carolina. "Several years from now," I said, "when he opens his practice in Saigon, there should be tremendous opportunities for him." By then Vietnam will probably be the second-biggest oil-producing country (after Indonesia) in Asia. It is already the second-biggest rice exporter (after Thailand) in the region. And the service industry should be up and running. "When your son's generation takes control," I predicted to An, "Vietnam will finally realize its potential." He didn't disagree.