THE North-East chemical industry is poised to benefit from changes in the rules governing applications for regional aid.

The Government plans to overhaul its programme of Regional Selective Assistance (RSA) grants, following the failure of a series of high profile projects to deliver promised investment and jobs.

Ministers now believe productivity, rather than job creation, should become the key selection issue governing the allocation of hundreds of millions of pounds each year in RSA grants.

At present, firms must prove that a grant will either create jobs or safeguard existing ones.

But the new criteria will open the door to companies who need the cash to remain competitive.

The process industry, which accounts for 30 per cent of the region's annual gross domestic product, is expected to be the biggest benefactor.

Richard Maudsley, deputy chairman of regional development agency One NorthEast, which administers the grants, said: "This broadens the base on which Regional Selective Assistance can be granted.

"The chemical industry is very capital-intensive, but does not involve vast numbers of jobs.

"If a company, for example, wanted to build a new processing plant, it could not put in a bid for RSA money because it didn't meet the criteria."

The cash is given to "assisted" areas in the UK, to help address economic underperformance.

In the past year, One NorthEast has made 74 offers of RSA grants, totalling £30.3m, to companies in the region.

If these are all taken up, it is estimated to create 2,689 jobs and safeguard a further 3,932. It will also involve private capital investment in the region of about £207.5m.

About 60 per cent of RSA offers go to domestic firms.

Nationally, a third of the 50 largest RSA recipients during the past decade have missed their job creation targets and ten of the projects supported by grants had closed.

Several high-profile projects in the region have collapsed, including the Siemens plant, on North Tyneside, which received £18m to create 1,100 jobs in 1996 and closed in 1998.

Others, such as grants to the Nissan car plant on Wearside, have been hailed as a major boost for its suppliers in the region.

"We are often all too quick to publicise our failures rather than champion our successes," said Mr Maudsley.

"There is always an element of risk, but we have far more who go on and do well than fail."