3    "Dirt Shack"
. . .

"Real-estate was the only market there was to invest in," said the senior executive in fluent English. "Land speculation was irrational but profitable. The market was zero, then the first foreigners had to pay very high prices, so expectations rose. Those were the first selling signals."

Simply, the early 1990s was the first time modern Vietnamese were able to invest cash. Tens of thousands of (mostly urban) families were fat with it. Some had savings from activities during socialist times.

But the biggest source of fresh cash is "Viet Kieu" (refugees and overseas workers) who remit dollars to relatives to the tune of $1.5 billion or more yearly (according to the World Bank and other sources), often investing through them.

Still others collected their investment nuts by renting their state-owned villas or offices for tens of thousands of dollars monthly and still do. "People had the cash in their pockets and parted with it easily, she said."

Banks -- which for years were virtually unregulated -- played a key role for the most active speculators in the early days, 1991 to 1995.

She explained that borrowers bought one property, then used it as collateral for the next. The powers of bank assessors were weak and their numbers were few, so borrowers set their properties' values as they desired.

(This particular practice was halted when in 1995 the country's market turned downward, due to the glut of newly constructed office and housing space, downturn in FDI, along with government legislation [Decree 18] that abruptly halted this practice by virtually forbidding banks to lend at all.)

Calling this a "free market" is a misnomer. While the current market decides the value of properties and creates winners and losers, a central factor in a property's selling price is its relation to laws that define and protect property, but do not yet exist.

The market has attracted some speculators seeking to put into play the popular local expression, "It is the muddy waters in which the biggest fish are caught."

Whether the real-estate market degrades into another simple, gray-market commodity, as Vietnamese had been accustomed to swapping in appointed alleys during the Socialist years, or transforms into an engine of growth, is now dependent upon the government's next move. And its position (ignoring, for a moment, the preference among some leaders for muddy waters) eloquently sums up the ideological crossroads which it has long dreaded, and now found itself to have arrived.

A young, frank vice-director of a showcase state bank (who also requested anonymity) thinks about little other than this quandary. His job is to lend money to real-estate developers.

On a recent mid-morning visit to his recently renovated bank headquarters, appointed with an august lobby, was quiet. The staff sat at a reception table eating berries.

The executive described the increasingly elaborate system of evaluating property he is required to follow.

A bank officer travels to the area of the applicant, and calls a meeting between himself, the local people's committee with jurisdiction over the borrower and a rep from the national-level Department of Land Management, which ultimately oversees land usage in the country. Together they review other local prices, then factor in a guidance sheet prepared by the Ministry of Finance and come up with a number.

Unfortunately, the exec implied that the entire procedure was farcical.

He leaned in and whispered. "What do we (bankers) do about defaulted loans -- seize land? (Legislators have proposed shedding that problem by simply dropping the collateral requirement). Another thing -- we have no idea what the (commercial) basis is for the MoF guidelines. Land is not decided in our society, so we have many difficulties applying these rules." The value of land? He had no idea.

With a raised eyebrow that suggested much, he recommended a visit with the Department for National Land Management (DNLM).

The DNLM is a vital office within the MoF because its receipts account for about 10 percent of the national budget. Also, this department actually sets land values, sometimes to compensate people for land taken over by the state for public works, foreign invested projects. For tax and accounting purposes, they are also charged with convincing people to claim legal ownership of their homes.

Mr. Nguyen Van Xa is deputy director of this department, and his favorite topic was the perplexities of his job.

He pointed out that there was only one ironclad way to claim "ownership rights" of land -- to possess a "testimonial," the highest level of claim, as he categorized it. To date, he said, there are but 51,000 in all of Vietnam, or about 2 percent of houses. Those 51,000 fully legal property owners comprise the nation's legitimate annual property tax base -- and taxes are very high. That is just one reason that applications are very slow to trickle into his office, he said.

After the young banker's scorn for the "land value grid" that his office has calculated, one might have expected Xa to come to its defense. Not so.

He said that "The current method of valuing land "is not being done properly, and I know because I am directly in charge of this," he said.

"It was their land, then it wasn't for 30 years, now it is again. Very complicated!" he admitted. "We are unable to design criteria."

Why not? It was Xa's turn to raise an eyebrow. "Visit my respected colleague Dr. Thinh, at the General Department of Land Administration (GDLA)," he said, and helped to arrange that meeting.