John Aglionby – The peace process begun two months ago by the Indonesian government and the Free Aceh Movement (Gam) is developing in a way virtually no observer predicted.

Events in the province, on the northern tip of Sumatra, are progressing much more hopefully than anyone expected when the two sides signed an agreement in Helsinki on August 15 to end the 29-year insurgency that has cost some 12,000 lives.

This week marks the halfway point in the decommissioning of Gam weapons and withdrawal of Indonesian security forces. Both sides are ahead of the agreed targets, although Pieter Feith, the European Union diplomat at the head of the international monitoring team, told Guardian Unlimited he was disappointed by Gam's performance in East Aceh, one of the districts where the fighting has been the most fierce in recent years. "Both in quality and quantity the cache [of weapons surrendered] was extremely poor," he said.

However, such a detail is not derailing the larger, optimistic picture. "I'm astonished that it's going so well," Irawadi Yusuf, the senior Gam interlocutor with the government, told Guardian Unlimited. "I expected there to be many more skirmishes and violations of the [deal]."

Major General Bambang Darmono, his Indonesian government counterpart, is equally effusive. "There's a really constructive attitude for peace in the field," he said. "I think we've reached the point of no return as long as the politicians in the towns don't interrupt the process."

Nur Djuli, the most senior of Gam's exiled leadership to return to Aceh, agrees the movement cannot resume its armed struggle as long as Indonesia adheres to the agreement. "If we were to dig up weapons and start fighting we would be branded terrorists, and that would be a disaster. So there's no going back," he told Guardian Unlimited.

Evidence of this optimism is the calm way the two significant incidents have been handled. On October 14, for example, a soldier fired at three men on a motorbike in East Aceh. The passenger who was hit was an ex-Gam fighter. Mr Feith gave the military, who have arrested the soldier, a public dressing down and Gam says it is happy with the way the case is being handled.

The changing mindset of the Indonesian military, which for years did not see itself as subservient to the nation's civilian rulers, is a big reason for the success so far of the peace process. "We're aware that Indonesia is now a democracy and the political decisions of the government have to be respected," Gen Bambang said.

Analysts believe this new mentality is helped by President Susilo Bambang Yuudhoyono being a retired general. "This former hawk might have become a dove but he still has long and sharp claws," said Aguswandi, a researcher with the human rights group Tapol who is based in Aceh. "He is keeping tight control on the troops."

The fact that Gam's chain of command has proven more solid than predicted has also been significant. "Gam has always been very disciplined," said Nur Djuli. "Of course, there are some naughty boys coming back to the villages brandishing weapons but for the most part we're very disciplined."

The Boxing Day tsunami, which killed more than 132,000 people in Aceh and left some 500,000 homeless, continues to play a role after the initial devastation focused the two warring parties' minds. Faltering reconstruction and the plight of tens of thousands of refugees still in tents is reinforcing the need to keep the peace process on track.

However, no one in Aceh is complacent that sustainable peace is a foregone conclusion in the wake of the early successes as there are still two big stumbling blocks that need to be overcome.

The first is the reintegration of Gam fighters into society. The agreement says that 3,000 demobilised insurgents will receive compensation and vocational training from the international community. Gam is currently declining to hand over a list of names, instead wanting the money to be transferred to commanders who will then distribute it not only to the fighters but also to a wider circle of supporters.

Mr Feith says he understands their reluctance, considering "there is still a climate of intimidation and the intelligence services are still operating here", but insists that eventually the names will have to be submitted to ensure accountability and transparency

The Gam leadership's hand might be forced by its own members, who are coming forward in increasing numbers to register but are being turned away because the authorities have not received their details.

Worrying Gam is the draft of the law that will enshrine Aceh's wide-ranging autonomy, including the right to form local political parties. At least five versions are currently floating around and reports from Jakarta suggest the government might allow Acehnese parties only to contest national elections and not local polls.

"The whole concept of establishing local political parties is still at an early stage but it needs to be addressed in the same spirit as in Helsinki," warned Mr Feith. "The government would be making a mistake if it thought it could cut corners on that."

Until these issues reach their tipping point, which should be within the next month for the Gam list, the monitors remain cautious. But with both sides appearing committed to peace, the continuing optimism appears well founded.