As another heavily grant-subsidised foreign investor pulls out of the region, Business Editor Mike Parker asks if it is time radically to overhaul state aid for business.

HIS face says it all. The downcast eyes and defeated voice of the young fitter echoed the devastation felt by 450 workers who will today be joining the dole queue.

Twenty one-year-old Martin Flett, leaving Samsung's Wynyard site where he worked for the past two and a half years, says: "Everybody is just coming to terms with what this means. There is anger there, not at local management but at the Korean bosses who are making so much money and have let us down."

The same Korean bosses were a sea of smiles nearly ten years ago when the ink was barely dry on a £58m cash sweetener that marked the beginning of an unfulfilling affair with the North-East. It should have created massive wealth, but ended yesterday in closure and redundancy.

The promise of £600m investment creating 3,200 jobs now lies in tatters and the agencies whose predecessors had helped bring Samsung to the region are left to pick up the pieces.

Regional development agency One NorthEast says the Korean firm only received £10.5m of the proposed £58m regional selective assistance (RSA) grant. There were potential ways in which to claw much of that back, it adds.

Tell that to the workforce and the hundreds of suppliers, shops, pubs and the rest of the myriad of life that builds up around a major international company.

Many have been left questioning why fat payouts to Samsung and a list of other failed foreign investments should have occurred.

RSAs are not new, they have been in existence in one guise or another for the past 30 years. They were set up to redress the economic imbalance in the country, to plaster over the cracks caused by creaking heavy industry that threatened to rip apart communities dependent on jobs in coal mining, ship building and steel making.

Thirty years on, one wonders why the Government persists with a grants system that has yet to fulfil its primary role, and, in certain cases, has caused the heartache Samsung will wreak.

Andrew Harrison, principal lecturer in economics at Teesside Business School, says: "The benefits are generally short-term. Foreign investment relationships should be seen as long-term commitments. But the costs seem to outweigh the benefits."

In the past, the UK has been a 'Trojan Horse' for foreign firms looking for a route into lucrative European Community markets. But, as Mr Harrison points out, situations can change and the raft of former Eastern Bloc countries lining up to join the EU makes for a cheaper alternative base.

He says: "There needs to be a number of factors in place to make a company stay for the long term. Many companies come here to access the European market as a whole. They have to have a number of factors in place - grant assistance tips the balance in favour of coming, but once the grants dry up the balance of advantages change."

The region has suffered more than its fair share of high-profile failures. Siemens was attracted by an offer of £25m and opened its doors in 1996 but closed 18 months later. US electronics firm Viasystems was given £12m in 1997, but folded its Tyneside operations in 2002 and Fujitsu took £17m of a total offer of £30m but still ended up pulling the plug on its Newton Aycliffe factory in 1998 after just seven years in the region.

There is an argument that major RSA grants can cause more problems than they solve. Professor Ray Hudson, director of the Wolfson Research Institute at the University of Durham, believes that when they fail they can push a region into a downward spiral.

He argues: "There is a massive impact in terms of money lost to the local economy, arguably a psychological impact and there is an impact in terms of One NorthEast trying to project the region as successful and dynamic. We have lost the old heavy industry economy but the new economy seems to be going also.

"If what you have got is a large pool of people looking for jobs, what you are likely to attract is the next round of low labour cost, routine assembly companies, which will probably be there for less time than the last cycle of companies."

That message appears to be registering in this region.

Alan Clarke, new chief executive of One NorthEast, says: "Things have changed. For the foreseeable future, the days of the really big inward investment are behind us. We have not seen anything like a Nissan or Samsung in this country or parts of Europe for quite some time.

"The international inward investments we have been bringing in recently are much smaller, niche areas, higher value added so it would be difficult to move to where wages are lower.

"It takes a lot more time to get the same number of jobs created but they are more sustainable. We have realised putting all your eggs in one basket, particularly in the North-East, is not a good thing to do."

There is evidence that RSA can be a success. Geoff Turnbull, of Peterlee-based GT Group, is an unashamed champion of the Department of Trade and Industry grants system.

He transformed a small sub-contracting engineering firm established in 1973 and employing 45 people into a world-class group of companies employing 400 people across the North-East and fulfilling contracts worldwide. It was RSA assistance, totalling £750,000 over 20 years, that helped his business develop every time he needed to expand.

"There is no doubt without the money we would still have succeeded, but not to the extent we have done," he says.

GT Group embodies many of the principles that the One NorthEast chief executive would wish to see used with RSAs in the future. With unemployment at an all-time low, Mr Clarke now believes the priorities have changed.

"The economy of the region is a lot stronger than the 1980s, we are more resilient. In the 1980s and 1990s unemployment was higher, those jobs were providing much needed employment at the time when there was not a lot of choice around."

He adds: "RSA is something in our armoury, but not the total solution."

The Government is currently reviewing RSA and assessing a departure from its former core goals. At present, jobs created and safeguarded are the currency of success for companies bidding for money. In the future this is likely to change to put the emphasis on the productivity and skills companies can bring to the region.

There are more than 100,000 people in the North-East employed in foreign-owned companies, an important part of the regional economy that the region needs to maintain.

But policy makers would be wise to look close to home when deciding the best way to boost and maintain productivity in the region.

Mr Turnbull has the final word: "From my office window I can see the house my mum and dad used to live in. Hell would freeze over before we move any companies."