Since the 1980s, many developing countries have embarked on decentralization in a wide variety of circumstances and for diverse reasons. In some countries decentralization was part of an ongoing programme to raise the efficiency of public administration, but in others it was associated with fundamental changes in the structure of government. The fall of a centralized authoritarian regime, for example, often led not only to constitutional and electoral reform but also the re-structuring of centre-region relations. Democratization extended naturally from the centre to the regional and local levels, although the degree and form of decentralization varied considerably. While most countries decentralized incrementally, Indonesia's initial reform was dubbed a “big bang” that transformed the highly centralized unitary structure of the New Order into one that was highly decentralized. Observers described it as “the most daring decentralization policy in developing countries” based on “the most radical decentralization laws in Asia and the Pacific”.

This chapter opens with a brief description of the centralized New Order regime before discussing the drastic “big bang” decentralization measures introduced after Soeharto's fall. Despite their previous support for virtually unfettered central domination of the regions, Golkar and its military partner, which together constituted an overwhelming majority in the unreformed DPR elected in 1997, quickly reversed their position on centre-region relations and supported radical reform legislation proposed by President Habibie. The 1999 regional autonomy laws were adopted in the shadow of a national crisis and the prospect of national disintegration — circumstances that Grindle and Thomas would call “crisis-ridden”. But by the time that the 1999 laws were replaced in 2004 concerns about national disintegration had largely abated and “politics-as- usual” had been more or less restored, to borrow another term from Grindle and Thomas. The rushed adoption and implementation of the 1999 laws had led to much confusion and controversy that generated resistance inspired by ideological, pragmatic and interest-based considerations. The revised 2004 laws were the product of “normal” bargaining and compromise between the major parties in the legislature. Although they restored some of the central government's authority, the new laws fell far short of the centralization of the Soeharto regime while further entrenching decentralization by introducing direct elections of provincial and district heads. Finally, the chapter raises the question of the vulnerability of regional governments to elite “capture” and its implications for democratic accountability.