EUROPEAN Trade Commissioner Peter Mandelson opened the forum on Thursday with a speech at the Centre for Life, in Newcastle.

On his first return to the North-East since quitting as Hartlepool MP a year ago to move to Brussels, Mr Mandelson urged the region to create more jobs rather than rely on the type of foreign inward-investment that had created "sunrise" industries from the 1960s to the 1980s.

"That prosperity did not weather the economic hurricanes of the 1980s because it was a generation of jobs located in the North-East and not generated in the North-East," he said.

"Now, our enterprise, our skills, the use of our capital, need to be rooted in the North-East, not parachuted into the North-East."

He accepted the argument that the region was too dependant on the public sector as a source of employment.

"The solution surely is not to dismantle our public sector, but to make the North-East a beacon of innovation and initiative that comes from our ingenuity and creativity," he said.

"There is an opportunity for new social enterprise that can branch out beyond its traditional sphere, and that's why I look to the North-East to pioneer new ways of harnessing the public sector so that it plays its role in generating economic wealth."

Mr Mandelson said the region faced serious competition from the Far East and Asia, but the North-East was better placed to meet the challenges than other parts of Europe.

He said: "Those who interpret this challenge as a race to the bottom based on low wages, low costs and low environmental standards have got it wrong.

"The staggering thing about Asia is the appetite for education, the outpouring of graduates often in computer science and engineering, and the determination to develop their own research base.

"This is not a race to the bottom. It is a race to the top."

Mr Mandelson's speech laid the way for yesterday morning's keynote address on education reforms by Tony Blair.