The new policy of regional autonomy introduced in Indonesia under Laws 22 and 25 of 1999 has been legally in force since January 2001. Unlike the laws of the same year on the party system, general elections and the structure of the legislatures, which were subject to widespread public comment and debate, the two decentralisation bills attracted relatively little public attention. In the national parliament itself, the bills were passed into law with a minimum of debate and few amendments. Indeed, no substantial changes were made from the government's original draft legislation, a remarkable outcome considering the sweeping nature of the decentralisation provisions. Members of parliament generally considered the bills to be too good to be true; for the first time, the government itself had initiated a policy to reduce its own powers and surrender authority to the regions in a significant way. In other words, for both parliament and the public, Laws 22 and 25 reflected a genuine commitment to the reform of governance.

Parliament's positive response to the decentralisation bills reflected a view that the proposed changes represented an acceptable compromise between the two main contending concepts of government reform, namely the introduction of a federal system under which power would be devolved to the provinces, or the retention of the existing highly centralised system with only small modifications. Neither of these options enjoyed strong public support. Any attempt to shift power to the provinces would have been read by the conservative Unitarians as promoting federalism, by extension placing at risk national coherence and integrity. Inevitably this would have ignited a bitter public debate. The Habibie government had maintained from its inception that the period of extreme centralism was over, but it did not wish to be labelled federalist. The focus of regional autonomy was therefore on the district and municipality (kabupaten/kota) rather than provincial level of government. The devolution of political and economic authority to the district tier of government was seen as an acceptable middle-way solution. The policy was intended to provide more scope for local creativity and initiative in making policy and promoting public participation.