In the belief that its economic reforms and troop withdrawal from Cambodia will bring a surge of foreign business, Vietnam has opened its first five-star hotel, a six-story boat moored off Hero Square.

The Saigon Floating Hotel pledges to serve as a premium business oasis for travel-weary executives, at a cost of $150-$600 a night. The hotel's Australian management admits that the hotel is not meant for Vietnamese, many of whom do not make in a year what a modest two-room suite would cost for one night."You'll hear from some of the locals that this hotel is built more for outsiders than for Vietnamese," said Patrick Imbardelli, the hotel's general manager. "Well, they're absolutely correct.

"We want executives to be able to step off their flights, get through the mobs at the airport, walk through our front gate and feel like they could be in any hotel in the world."

To maintain its air of exclusivity, Imbardelli said, the floating hotel will surround its outdoor swimming pool and tennis courts with a "tasteful" wall tall enough so that curious Vietnamese can't look in. The hotel opened on December 4.

Hundreds of Vietnamese out for weekend promenades have already stopped by to get a look at the hotel, a modern white structure rising above old Saigon's elegant but shabby French colonial buildings. The city was renamed after independence hero Ho Chi Minh in 1975.

Not all passers-by are impressed.

"It doesn't fit in," said Huong, a university-educated pedicab driver who served on the U.S. side during the Vietnam war. "It might have looked okay in Australia, but here it just looks strange."

The Saigon Floating Hotel did indeed come from a mooring at Australia's Great Barrier Reef, where it was losing money. Its owners, the EIE hotel group and private Australian shareholders, decided profits might be better where hotel space was more desperately needed.

Ho Chi Minh City is such a place. Vietnam has declared 1990 its "Year of Tourism," yet Ho Chi Minh City has only 1,500 hotel rooms. This hotel will add another 201 rooms but, Imbardelli stressed, the hotel hopes to fill them mostly with well-heeled business people on expense accounts.

"When you can use Vietnam's first international direct dial telephone, when you can fax or telex or get something typed and translated and ready for you in the morning, when you can order decent Western food to be brought to your room at 3 a.m, it's worth the extra money," Imbardelli said.

The hotel operation in Ho Chi Minh City is a joint venture with the Vietnamese Overseas Finance and Trade Corporation (OFTC).

The Saigon Floating Hotel's chances for success hinge on Vietnam's ability to lure foreign companies which the recently formed OFTC is trying to do.

Promoting Vietnam's year-old foreign investment code, one of the most liberal in the world, OFTC now cooperates in 21 joint ventures with foreign companies.

Drawing foreign investment into Vietnam's anaemic economy continues to be a struggle.

For more than a decade it has been economically isolated by most Western countries who withdrew financial assistance to Vietnam after it invaded Cambodia in 1978. Even though the last troops officially pulled out in late September, the anticipated flood of new investment hasn't come.

"The Vietnamese are really disappointed that they did what they said they would do -- pull out of Cambodia -- and have received nothing in return," said Isabelle Michelet, a French businesswoman who as assistant to the OFTC chairman is the sole Westerner working in a Vietnamese government organisation.

"With something like this floating hotel, they're showing that they really want Western business to come in," she said.