Most countries include some kind of arbitration when something is disputed e.g was the damage caused by negligence or wear and tear? The smart contract can't settle disputes like this without a trusted party.
Even in 3rd world countries you will need someone to understand programming and contracts to verify that the smart contract actually implements what you've agreed on.
So you're replacing "government agents installed through corruption" with "saints beyond reproach because smart contracts"?
And somehow this won't also end up artificially boosting the "reputation" of potential arbitrators?
(Or perhaps the government will make it clear that anyone who acts as an arbitrator without government authorization will spend a long time in a small cell.)