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Cablegate: Real Estate Investment As a Gateway to the U.S.?

This record is a partial extract of the original cable. The full text of the original cable is not available.

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

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