Indonesia is a unified state which recognizes democracy and the rule of law. The second amendment to Article 18 of the Constitution of the Republic of Indonesia 1945 which relates to local autonomy has done much to further both these ideals. However, it is difficult to maintain the democratic process where local officials are concerned, and where their election into office tend to be influenced disproportionately by ethnic and cultural groups. This has a negative effect on the values associated with real democracy. Moreover, local leaders have a great deal of authority in managing their areas (through taxes and levies) and expend a considerable amount of money on local elections, a problem which is compounded by widespread corruption. This paper will examine some of the problems of local government which have an adverse impact on democracy in Indonesia.