After more than three decades under a centralized national government, Indonesia decided to implement a new policy of regional autonomy that became effective on january 1st, 2001. this paper examines both the preparations for and the initial implementation of autonomy in the regions, as well as some of the challenges which have emerged during implementation. the paper is based on research conducted in fourteen districts across eleven provinces over to the last two years. this presentation has two areas of focus: first, the internal processes used by local governments to manage their new powers and responsibilities; and second, the extent to which the process of creating public policies under regional autonomy for the regions reflects the spirit of transparency, good governance and democracy. law no. 22, 1999 on local government has devolved central government authorities to local governments in all government administrative sectors, except for security and defense, foreign policy, monetary and fiscal matters, justice, and religious affairs. consequently, local governments have had to reform their internal structures to accommodate the huge increase in responsibility that has been passed on from the central government. a significant part of this process includes placing a large number of central government employees under the regional governments and increasing their financial capacity to implement regional autonomy. the absence of a detailed plan for the transition process and the lack of supporting regulations to clarify the procedures which need to be undertaken, have hampered this sweeping devolution of authorities. the change in government administration must also deal with a lack of initiative and support from government employees for the policy. many of the government employees who are now implementing regional autonomy are accustomed to being the implementers of centralized government policies. in addition, the previous government was characterized by its practices of corruption, collusion, and nepotism. the main objectives of regional autonomy are to promote better delivery of government services and to raise the level of local government accountability. therefore, the focus of this discussion covers both the impact of regional autonomy on local governments, as well as the impact of this policy on the performance of local governments in delivering services. assuming that local governments are more familiar with the needs of their communities than the central government, we expect local governments to be able to create more suitable public policies. ultimately, regional autonomy is not simply a matter of regulating the relationships between the various level of government. rather, it is about regulating the relationship between the government and the people. however, this is still difficult to achieve in the regions, because almost all local interest groups, including political parties, remain weak and poorly organized, because they have been almost completely left out of the political decision-making process over the last three decades. without strong civil society institutions, it will be difficult to achieve practices of good governance.