When the politicians and local dignitaries lined up to be associated with the massive Seagate investments in Clonmel and Cork, it seems they forgot to warn that the projects contained a much higher risk of failure than those normally approved.

As the proposals made their way from IDA Ireland to the Cabinet table, the agency maintains that at every juncture they carried this health warning.

While the company was financially very solid and was indeed one of the leading lights in the disk-drive sector of the electronics industry, the highly volatile nature of that business always had the potential to cause problems. On Wednesday, the worst-case scenario envisaged by the industrial development agency was realised, leaving 1,400 people in Clonmel without a job and all but shattering any hope of a future jobs boost for Cork.

Seagate will now go down in Irish industrial history as the shortest State-backed investment and has once more raised fears about the long-term stability of Ireland's multinational sector.

Its demise is a setback for the Government, the IDA and for the company, which has lost $90 million (£62 million) in its two years in Clonmel.

For IDA Ireland, it was the speed and the immediate impact of Seagate's decision to close its Irish operations that caused the greatest shock. After years of record jobs growth and an almost constant flow of good news on the jobs front, the closure is a major blow.

But IDA Ireland insists that despite the adverse consequences for the 1,400 workers, Seagate was a risk worth taking and will not rule out backing a similarly risky project in the future.

"While it sounds very cold and unsympathetic to the workers, in economic terms that risk had to be taken and we are still in the same situation," the agency says.

"We have to take risks to achieve high volume jobs growth. In Seagate's case, the risk factors in this industry were much higher than we would normally consider but it was a risk worth taking for the total electronics industry in Ireland," the IDA claims.

The Clonmel plant received £12 million in State-backed grants for creating 1,400 jobs, which translates into an average cost of around £11,000 per job, well below the average £13,500 to £14,000 normally incurred.

Seagate will now almost immediately have to repay these grants to the Government and has agreed to do so.

The agency firmly rejects suggestions that perhaps the Seagate project was pushed through with unusual speed under political pressure to find a replacement industry for Clonmel after the loss of Digital.

It points out that Seagate had first decided to base a manufacturing plant at Coolock in Dublin in 1991 but these plans were shelved because of the volatility in its core market at that time. In 1994, however, market conditions began to improve and against a steadier trend, the company once again dusted off its proposals for an Irish manufacturing plant. Its timing was opportune and it was immediately encouraged to establish in Clonmel in the former Digital plant.

Today, the IDA no doubt feels caught between a rock and a hard place.

It is expected to attract world-class companies to create secure jobs in Ireland and has if anything been overachieving in this regard over the past two to three years.

"Ireland had to have disk drive manufacturers, otherwise other multinationals would have been sceptical of Ireland's commitment to the entire sector," the IDA says. Few could argue that this strategy has not paid off. This year again the agency has beaten all of its European rivals to win one-third of all US electronics investment in Europe.

IDA Ireland accepts that the decisions which affect global companies are rarely made in Ireland. As with Seagate, the decisions will be made in the corporate boardroom in the US, and passed on to the Irish management and workers.

It is heartened, however, by the growing autonomy being given to many of its flagship projects, such as Intel, Hewlett Packard and IBM, whose senior management are acknowledged as having a major say in what happens in Ireland.

Its concerns will always be more keenly focused on the operations run by managers, which it calls "boy scouts" who are merely running the company on orders from head office.

In the wake of the Seagate closure, the IDA and the Government are already looking for a replacement industry for Clonmel.