Vaudine England – The Government will keep control of foreign, defence, monetary, judicial and religious policy but devolve many other powers to legislatures at the district level under a law that comes into effect today.

In what is heralded as a new stage in the country's democratic transition, much authority is to be transferred to the 364 districts, deemed more accountable to local wishes.

"Regional autonomy is a process of democratisation in the Government," said Home Affairs Minister Suryadi Sudirja. "We don't want to fail in democracy building."

Officials said it was the only way to hold the nation together in the face of frustration with the failures of central Government and the injustice of Jakarta soaking up most of the wealth generated by the provinces.

But critics said the law was precipitate: the districts were not prepared for their new powers, and there were not enough supporting rules in place to cope with the plethora of disputes. Instead of decentralising power and keeping the far-flung population happier at home, the law could decentralise corruption and further splinter communities.

Andi Mallarengang, a former adviser to the Government on devolution, said that without regional autonomy, "there's no way to hold Indonesia together", but he added: "Many of the local legislators don't understand what regional autonomy is about. They think autonomy means a chance for them to impose taxes on everything, dead or alive."

Speaking about the law, which was initiated by his predecessor, Bacharuddin Habibie, President Abdurrahman Wahid said: "To be honest, the legislation has happened too quickly. I've tried to question whether the regions are ready for this. There are some that want this to be slowed down. But what can I do? It has already been decided.

"First, [we must remember] the desire to base all matters on a balance between rights and obligations. So, don't just demand the rights. Second, the regions cannot ride roughshod over international commitments, especially in terms of trade."

Ministers conceded that no matter how ill-prepared the law was, the decentralising process would continue, and would involve many messy test cases. In lengthy reports by the World Bank, the International Monetary Fund and others, one key question was who would mediate such disputes and how they would do so, given the deplorable state of the country's judiciary.

Another issue was who would control the legislatures and who wield authority in the kabupaten (districts). "With its continuing presence in the regions, the military will maintain its stronghold in the civilian domain," Australian academic Ross Worthington warned.

With or without the new law, locals have been taking their fate in their own hands. Land has been taken back forcibly by people who say it was misappropriated by Jakarta's rich and powerful.

Mr Mallarengang said the most important consideration in implementing regional autonomy was whether there was the will to minimise negative effects, such as the creation of "little kings" (warlords).

The Government must show skill – hitherto little in evidence – in managing the physical removal of hundreds of thousands of civil servants from Jakarta to regional posts, and the many more already in district offices who face redundancy. "We have suggested gradual decentralisation, because this problem is related to contracts signed with international players," said Minister of Energy and Mineral Resources Purnomo Yusgiantoro.

Conflicts are already under way over revenue from such projects as the PT Inco nickel mine, in South Sulawesi, and the oil mined by PT Caltex Pacific Indonesia.