Jakarta – Indonesia on Monday began an unprecedented devolution of power to its regions in a momentous move aimed at keeping the vast archipelago – already fraying at the edges – together.
As of January 1, Indonesia's 29 provinces and some 300 districts become empowered to decide on their own budget and administration, leaving the central government with foreign affairs, monetary and defence affairs as well as 40 percent of the provincial tax revenues.
The move represents a dose of autonomy the government hopes will placate growing demand in the provinces for more say and in some resource-rich areas, more income.
Regional autonomy was initiated during the government of autocratic former ruler Suharto in 1997 with 68 model districts given limited financial autonomy.
But the legal foundations were only laid down in 1999 under Suharto's successor, BJ Habibie who issued a law on regional autonomy and another on the shares of revenues between the central government and the regions.
They have since been criticized as being too hastily prepared, with plenty of loopholes that may encourage corruption and nepotism in the regions.
It has also vexed foreign investors and lending institutions, including the World Bank and the IMF. They warn that, once unleashed, inexperienced provincial governments angered by the decades they have seen their wealth milked by a rapacious government in Jakarta, will equally-rapaciously drain foreign oil, mining and timber companies dry.
In the three years since Suharto's fall, foreign mining companies have already had their fingers burnt. Some have had to shut down for months as peasants whose land was forcibly appropriated by Suharto's military, swarmed back onto "their" land.
But the government of the country's first democratically-elected president, Abdurrahman Wahid, says decentralization is the only option.
Alarmed by virulent rise of separatist movements in Aceh and Irian Jaya, especially after last year's overwhelming independence vote by which East Timor broke away, Jakarta says it has no choice.
"Regional autonomy is a process of democratization in the government, moving from centralization to decentralization ... [we] do not want to fail in democracy building," Home Affairs Minister Suryadi Sudirja said last week.
His director general for regional general government, Sudarsono Harjosukarto, brushed away fears of overly greedy district and provincial authorities.
"If there are local regulations that go against the law or against public interest, facitilies exist to correct these regulations," Harjosukarto told the SCTV television.
If the regulation was issued at the district level, the governor could cancel it and if it was at the provincial level, Jakarta could overule it.
The government readily admits that it is ill-prepared for the transition. "It is a process, we will be able to do repairs along the way," director general of budgeting at the finance ministry, Anshari Ritonga told SCTV.
The Tempo weekly, in an analysis of the autonomy package, said the lack of supporting regulations could open the door to conflict between central government and the provinces. "The spirit of autonomy is giving rise to confusion, fights for authority and conflicts," Tempo said.
Without the support of central government subsidies, authorities in poorer regions may resort to heavy taxes as a way of making up budget shortfalls.
Deddy Supriady Bratakusumah, a regional affairs expert formerly with the National Development Planning Board, said that survival of regions with no meaningful natural resources would now depend on their "ability to dig into the potentials of levies."
Attempt have already been made. Provincial authories are already clamoring for a bigger slice of revenues from giant nickel mining company PT INCO in South Sulawesi amd from oil company PT Caltex Pacific Indonesia in oil-rich Riau province.
In an effort to reassure sorely-needed investors – including the vital oil and gas companies – the Mines and Energy ministry in Jakarta has already promised that all existing contracts will be honored.