As Vietnam has moved into the same economic orbit as its Southeast Asian neighbours it has been exposed to globalizing forces which bring about social, economic and political change - one of a transitional economy. One of the Vietnamese state's main dilemmas during its transition from a command to a socialist market economy has been how to manage the emergence of market forces within an existing Marxist ideology. The social, economic and political context in which burgeoning new sectors and industries, such as international tourism, are gaining a foothold is complex and often contradictory. The international tourism industry provides a milieu demonstrating the state's response to new cultural industries and the strategy employed to regulate such development. The study of tourism development in Vietnam also provides an opportunity to rectify the under-theorization of social and cultural processes within the discipline of geography. This paper examines the impact of government regulation and its pro-State Owned Enterprise policy on the development of private small-scale tour operators in Vietnam. It uses a case study of the development of traveller cafés in backpacker areas of Ho Chi Minh City and Hanoi to argue that traveller cafés have been subject to erratic responses by government authorities and that attempts by the state to regulate the private tour operator sector are undermined by personalized social networks which are present at all levels. As a result of personal values, interests and the bureaucrat's ability to exercise discretion in the implementation of policy, the institutional management of tourism is not absolute.