Foreign Stake in U.S. Rises 25% : Report: The buying spree continued in 1989, from the Orange County coast to Manhattan, the Commerce Dept. says.

When Japan’s Tokyo Masuiwaya California Corp. snatched up the Dana Point Resort for about $104 million last year, it was playing a small role in a much-larger story that had foreign investors playing an ever bigger part in the U.S. economy.

Foreign investors in 1989 continued to pour more money into the United States economy than Americans were investing abroad, and America’s foreign debt burden surged 25% to $663.7 billion.

In Orange County alone, foreign investors spent billions to acquire land and other properties, ranging from hotels to high-tech companies, said Michael Liikala, head of U.S. Commerce Department operations in Orange County.

The new assessment, based on a report supplied Monday by the Commerce Department, shows the United States increasing its lead as the world’s largest debtor country.

Unlike in previous years, the department did not publish the actual net debtor position of the United States. It did, however, supply enough information that someone doing simple math could come up with the number.

In defending that change, the department said the debtor figures as presently compiled are unreliable.

Critics charged that the move was prompted by a desire to avoid publishing a report that would be politically embarrassing.

The Commerce Department report shows U.S. holdings of overseas assets rising by $146.9 billion last year to $1.412 trillion, a gain of 11.6%. But, according to the report, foreign holdings in the United States climbed 15.6%, rising $279.6 billion to $2.076 trillion.

In Orange County, Japanese investment in real estate alone totaled $621 million in 1989, a 23% rise over the $506 million invested in 1988, according to Kenneth Leventhal & Co. of Newport Beach. Nationwide, Japanese real estate investments leveled off to $14.7 billion from a record $16.5 billion in 1988.

The net debtor position is the difference between America’s assets abroad and foreign assets in the United States.

That difference grew to $663.75 billion last year, up from $531.08 billion in 1988. Some economists believe that debt total could surpass $1 trillion sometime in the next few years, a stunning reversal for a country that began the 1980s as the world’s largest creditor nation.

The United States held the title of world’s largest creditor as recently as 1983, when it had an investment surplus of $89 billion. That surplus fell to $3.3 billion in 1984 and disappeared altogether by 1985, when the country became a net debtor for the first time in 71 years.

The surplus was erased by the huge merchandise trade deficits the United States piled up during the 1980s as Americans put billions of dollars into the hands of foreigners to pay for imported cars and television sets.

Those dollars, now in foreign hands, have been reinvested in the United States in everything from U.S. Treasury bills to Los Angeles office buildings, setting off cries that America has transferred control of its economic destiny to foreigners.

Allan Young, head of the Bureau of Economic Analysis in the Commerce Department, said there was no pressure from the Bush Administration to not publish the net debtor figure. He said he took the action because of concern that the report understates the value of U.S. assets overseas because the report measured those assets at their historical purchase price.

That undervalued the worth of U.S. assets in foreign countries, many of which were purchased decades ago, in comparison to foreign holdings in the United States, many purchased in the 1980s.

Young said the BEA is working to produce a report that will give up-to-date values on all assets, both of foreign and domestic holdings. It hopes to have that report ready in a year, he said. If it is, the BEA will resume publishing a bottom-line figure, he said.

Private economists said they believe that the United States will still be shown as a net debtor.

C. Fred Bergsten, head of the Institute for International Economics, said that although the current report does understate the value of U.S. holdings overseas, it also understates foreign holdings in the United States because of errors in gathering data on foreign ownership.

“Our view is that both the asset and liability numbers are substantially understated, and as a result the bottom-line figure is probably about right,” said Bergsten, who is completing a book on America’s debtor status.

NET INTERNATIONAL INVESTMENT

Here are figures showing the net international investment position for the United States year-by-year since 1973. Figures are in billions of dollars.

1973: +47.89

PEAK; 1981: +140.92

1989: -663.75

Source: Associated Press