In Iraq, at one time I counted Shia militias as part of the government's forces since they fought Sunni terrorists (or just defended against them). But they eventually morphed into a hostile force, in part from prodding and support from Iran.
I recently posted on a Strategypage post on Thailand's success against their jihadis by using local defense forces.
Strategypage also writes about problems with these local forces:
The militias have kept the Islamic terrorists out of a lot of villages, where they would either receive, or simply take, food and other supplies. But now the police and army have a growing problem with the vengeful Buddhist militiamen killing neighboring Moslem villagers whenever the terrorists kill a Buddhist. If the security forces cannot contain this violence, they risk seeing their militiamen (most of whom are Moslem) using their weapons for a widespread civil war. Solutions often create more problems.
Which is why I don't blame the Iraqi government for being wary of the Sons of Iraq Sunni militias that defected during the surge. These militias need to be absorbed and regulated or disbanded and disarmed when unneeded. And those kept around need to be supervised closely.
Arming friendly civilians is good when enemy terrorists and insurgents are a threat. But this is always a necessary evil that should be wound down when possible.
