The government has got at least one important part of its industrial policy right. It relates to selective assistance to export companies threatened first by the recession which started two years ago, followed by an extremely weak recovery which is once again under threat.

Early on, the authorities decided to consider specific support to companies which, though threatened and even affected by the recession, stood a chance of recovering and even expanding with judicious assistance. This had to be both effective as well as in conformity with EU regulations. A policy was devised, largely between Prime Minister Lawrence Gonzi and Finance Minister Tonio Fenech, with the help of their respective team of experts, including those sited at Malta Enterprise. A handful of people from the private sector probably also contributed.

For its own reasons, not necessarily all valid, the government has not spelt out the assistance it has extended to various exporters. Word has it that largely it took the form of aid to help retrain and upgrade human resources to be ready for the installation of new lines of production to come on stream once the recession eased.

The Gonzi-Fenech tandem frequently refers to the success of their policy. They point out a number of companies which had gone on a four-day week, or were considering doing so, but eventually reverted to normal production and even brought forward expansion plans.

The latest link in the chain is ST Microelectronics. There was a long silence about the discussions taking place, and even a period during which the company shed around a fifth of its labour force - downing some 400 jobs. During that period there were not insignificant negative vibes. At one time, Minister Fenech pointedly indicated that STM was asking for too much, and that the government could not be made to extend assistance at any price.

Overall, however, prudent public silence was maintained. Whatever had to be said and done took place behind the scenes. Until, last week, both sides went public that STM was laying down new advanced production facilities which would make its presence in Malta more secure, at approximately the current employment level.

That is good news, even if not given in full context. I put it like that because emphasis was made on the number of workers employed by STM, which makes it our largest employer now that the old dockyard is gone, and the company accounting for around half of Malta's visible exports. It would have been more appropriate if information had also been given on STM's contribution to our Gross Domestic Product, with the value added ratio not being one of its stronger contributions to the Maltese economy. But, there is no question that 1,400 better and higher skilled jobs are hugely important.

It was, therefore, a significant achievement for the government to be able to announce a mutually satisfactory agreement on the way forward with STM. Less cheerful is the muted news that the company apparently is trying to get the workers' agreement to trim their remunerative package. From what one can gather, STM wants to leave basic wages unchanged, but is out to clip some of the additional operative rewards. Such rewards are not given for the sake of giving, but in return for the workers' additional effort.

Which is why not a few employees will be unhappy with what the company is proposing. They are represented by the GWU and the section secretary has made it known that the union has negotiated down management's demands. Nevertheless it seems that the cut in take-home pay will be significant. Loss of marginal income is never welcome, but particularly so at a time when consumers are being pinched by higher utility tariffs, and having to cope with what has become high-cost consumption, according to comparative figures given recently.

On its part the company is no doubt stressing that it has to operate in a keenly competitive environment with labour costs and productivity levels effectively determining location of production. What was affordable yesterday, management will say, is no longer automatically affordable today.

There is a limit to how much productivity can be increased, despite the combination of state-of-the-art equipment and management and a willing labour force. At the end of it, net pay may have to give a little.

The government, for obvious reasons, is keeping out of this part of the argument, other than commending the GWU for being positive throughout the negotiations with management. On its part, the GWU continues to draw on the old Phoenicia lesson, although many years have passed since the union was outmanoeuvred and brought to its knees by a cunning management. Wisely and correctly, the GWU section secretary has made it clear that the ultimate decision will be up to the workers.

At the end of the day, I expect that security of tenure will outweigh the pain of some loss in marginal income. That will encourage the government to persist with this particular industrial policy. It will need to do so.

The export sector is hardly as robust as required, due to continuing weak aggregate demand in our main export markets. Part of the pain of austerity measures being taken by various countries, counted among our leading markets, will be transmitted to the likes of us. The government still has its work cut out.