Conscious of strong employee resistance to privatisation of state-owned commercial enterprises, Sri Lanka´s former United National Party (UNP) government thought of an imaginative way to sugar coat the pill—gifting employees of companies that were being sold with 10 percent of their shares, free, gratis and for nothing. But the first privatisation in 1989 of United Motors Ltd, a government-owned motor vehicle importer holding the profitable Mitsubishi agency and running a repair workshop in Colombo, hardly generated any wild excitement either among the company´s few dozen employees who were getting 10 percent of its equity without charge, or among the general public to whom the rest of its shares were offered at par.
That was hardly surprising given the country´s condition at the time. The Janatha Vimukthi Peramuna (jvp, People´s Liberation Front), into its second armed insurrection after 1971, had brought the country to the brink of anarchy. In 1988-89, Colombo was embroiled in two wars, one in the northeast with the Tamil Tigers that had forced President J.R. Jayawardene to bring in Indian troops and the other against the jvp.
Most agreed thai the liming of the United Motors privatisation was fatal. Who but a fool would buy shares in any company that was being divested by the state when the very viability of the state was in question? But President Ranasinghe Premadasa, who succeeded Mr Jayawardene, and his government were determined to soldier on with the privatisation agenda despite the terror that stalked the land and that fact the business confidence had plummeted to zero.
Predictably, there were very few takers for the shares on offer and most of them devolved on the underwriters. The government did not even bother to formally distribute the free employee shares at that time. But the picture was to dramatically change just a few weeks later when, by the end of 1989, the security forces broke the back of the JVP insurrection and liquidated its leadership. Sri Lanka´s business climate improved dramatically and the United Motors share appreciated almost three-fold. That was when United Motors´ employees got their share certificates and government made good propaganda of employee benefits from privatisation.