US embassy cable - 03HOCHIMINHCITY655

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000655 
 
SIPDIS 
 
Dept. for CA/OCS/ACS/PRI, EAP/BCLTV, and EAP/PD 
State also pass to USTR Bryan 
 
E. O. 12958: N/A 
TAGS: CVIS, CJAN, ECON, SOCI, VM, EINV 
SUBJECT: REAL ESTATE INVESTMENT AS A GATEWAY TO THE U.S.? 
 
1.  Summary:  Recent advertisements carried in local Ho Chi Minh 
City newspapers for a real estate investment opportunity in 
Houston, Texas, attracted significant interest among local 
investors and the local press.  Post interest was aroused by 
implications in the advertisements that this investment would 
allow investors' children to attend public schools in the U.S., 
and that the Consulate had agreed in advance to notarize all 
documents related to the real estate sales.  Post issued a press 
release widely reported in the local press disavowing any USG 
endorsement or approval of the project and warning potential 
buyers that Vietnamese citizens need student visas to study in the 
U.S.  Post CONS and ECON chiefs sat down with the company's 
directors to discuss the misleading nature of the advertisements, 
and to clarify what the ConGen could and could not do in 
connection with visas and notarial services for Vietnamese 
investors.  The company has since printed a retraction of its 
earlier claims and has promised to clarify these issues with all 
potential buyers.  We expect that this is the first of many such 
investments that will be marketed to Vietnam's new monied class. 
End Summary. 
 
Buying a Piece of America 
-------------------------------- 
2.  In late June, a series of advertisements in local newspapers 
claimed that, for the first time, Vietnamese citizens would be 
allowed to invest in property in the United States.  SEI (Southern 
Investment and Informatics Corporation) Corp. of Ho Chi Minh City 
was offering 86 lots at a cost of USD 35,000 each, in a property 
development near Houston, Texas, under the name Diamond Star. 
Post's Public Affairs and ACS units received numerous inquiries 
about the advertisements, drawing our attention to implications 
within the ads that purchase of land in Houston would permit 
owners' children to attend public school, and that the Consulate 
General had agreed in advance to notarize all the real estate 
contracts.  Aside from the obviously misleading information 
regarding student visas, the implications contained in the ads 
that a special agreement had been reached between the GVN and the 
USG on this project raised concerns that the public might believe 
the USG had in some way endorsed or approved the investment 
project. 
 
Is This for Real? 
------------------ 
3.  In an effort to obtain details on the real estate investment 
deal, and to correct the misleading information in contained in 
the ads, Post's Fraud Prevention Manager contacted an SEI 
official, who responded that all of the information in the 
advertisement was technically correct, if examined from a certain 
point of view, and that SEI had in no way promised buyers that 
they would obtain student visas for their children.  This lack of 
responsiveness on the part of SEI raised further concerns that the 
Diamond Star Project might, in fact, be a scam.  Post's FCS office 
contacted the Department of Commerce office in Houston, Texas to 
determine if Diamond Star was a real project with actual real 
property for sale in Houston.  FCS confirmed that Diamond Star was 
a project registered by U.S. Southern Corporation, a wholiy-owned 
subsidiary of SEI. 
 
Post Clarifies Matters and SEI Comes Forward 
--------------------------------------------- ----------- 
4.  Post issued a press release to local newspapers in response to 
the advertisements and public and press inquiries regarding 
Diamond Star.  In the statement, the Consulate General disavowed 
any USG involvement in real estate deals and unequivocally stated 
that student visas are adjudicated and notarial services are 
provided solely on a case-by-case basis.  The subsequent media 
interest in the case grew as did questions about the bona fides of 
the project, and the directors of SEI Corporation found themselves 
trying to fend off new rumors that they may in fact not be a 
legitimate investment. 
 
5.  Upon further investigation of SEI, it became clear that one of 
the main investors of the company was a contact well and favorably 
known to the Econ section.  Mr. Dang Thanh Tam, who owns 25% of 
the company, is also director of a number of successful industrial 
parks in Vietnam.  At our request, he and a director of the 
company, Ms. Chau Ngoc Thi Nguyen met with ECON and CONS chiefs on 
June 30 to clarify their position. 
 
6.  ConGenoffs detailed Post's concerns regarding the misleading 
nature of SEI's advertisements, as well as our concerns over the 
response of SEI when contacted by our FPM.  CONS chief clarified 
the legal requirements for obtaining a student visa and the 
general circumstances governing notarial services at a U.S. 
Embassy or Consulate.  ECON reiterated that the advertisements 
troubled many of Post's staff, particularly the CG, as they led 
readers to believe that the USG somehow endorsed or approved this 
investment opportunity.  He stated that while Post is pleased to 
see increased interest in trade and investment between the U.S. 
and Vietnam, we are not in a position to support any particular 
project. 
 
7.  Ms. Nguyen provided details on the structure of SEI and U.S. 
Southern Corporation, described the real estate investment 
development project in Houston as well as planned future 
developments in Texas and Florida, and apologized for any 
confusion and concern the advertisements caused.  Both SEI 
officials promised to clarify the statements made in the 
advertisement, and promised that advertisements for future 
projects would not make such claims.  Mr. Tam also apologized for 
the advertising and market campaign that he characterized as 
sloppy and misleading.  He stated that this was only one of many 
projects that he was involved in, and as a minority shareholder 
(his sister holds majority share) he had not followed it very 
closely.  He assured us, however, that he would fix whatever 
needed fixing and that he did not want this "small project" to 
damage his reputation. 
 
8. On July 1, SEI forwarded a draft press statement to Post for 
our clearance, correcting the misinformation contained in their 
earlier advertisements and apologizing for any confusion such 
statements may have caused to potential investors.  A few days 
later the Justice Newspaper, widely read in Ho Chi Minh City, ran 
an article based on information from SEI in which SEI apologized 
for its earlier misleading advertisements and made clear that the 
visa issue is separate from any property transaction.  The Saigon 
Times Weekly also ran a letter to the editor from SEI in which it 
also reviewed the same issues.  No further advertisements for 
Diamond Star have appeared in the local press; however, Post 
continues to receive inquiries from member of the local media. 
 
Economics of the Deal 
-------------------------- 
9.  Initially press reports indicated that all 86 lots sold out 
within 36 hours of going on sale. As of July 15, however, most of 
those who "registered" to buy a lot have already cancelled.  Five 
buyers in Vietnam have put down 10% deposits, and another ten lots 
have been sold to buyers in the U.S.  It is not clear if potential 
buyers abandoned the project because of the bad publicity,  after 
they became aware that they were only buying land and not the 
right for their children to study in the U.S., or if difficulties 
in actually making the investment interfered with the transaction. 
Mr. Tam correctly noted to Econoff that Vietnam has not yet 
permitted capital to be remitted overseas for property 
investments, but his company is seeking permission.  All of the 
five current potential buyers in Vietnam have family or business 
interests in the United States so they do not face the same 
restrictions.  If this permission to remit funds overseas is not 
granted, it would make the sale of the remainder of the lots much 
more difficult. 
 
10.  Comment:  Although it is likely that the implication of easy 
student visas and USG backing was responsible for much of the 
strong initial interest in the Diamond Star lots, it is also 
indicative of a growing moneyed class in Vietnam that would like 
to invest abroad.  Land ownership is a popular investment choice 
among the Vietnamese, and Houston, with its large Vietnamese- 
American community, is a natural site for such development 
projects.  According to SEI, most of their buyers were people with 
relatives already in Houston, people planning to immigrate to the 
area in the near future, and companies whose owners are interested 
in having their children attend school in the U.S.  This case 
clearly illustrates the need for further public outreach regarding 
visa processing as well as general information on the role of the 
USG in daily life.  The case also shows that there is a growing 
class of people here with significant private resources despite 
the poverty reflected in the overall economic statistics for 
Vietnam.   Mr. Tam stated that this is the first of several 
property development projects overseas that SEI plans to market 
primarily to buyers in Vietnam.  End Comment. 
WHITE