Agencies: Definition, Examples, and Differences between Government and Private Agencies

Many Indonesians have probably heard the word agency, are you one of them? However, not a few also do not know what is meant by an agency. Therefore, on this occasion we will discuss about the agency. So, see this discussion till the end, Sinaumed’s.



Definition of Institution

Institution is a term that is well known and often discussed by many people in everyday life. Agencies are also often interpreted and linked as a government agency, including state agencies, central government, regional government, ministries, or non-ministerial institutions.

Basically, the term agency does not only refer to government agencies, but can also refer to privately owned institutions. In the Big Indonesian Dictionary or KBBI, describes an agency as a general government body, such as an office or service. In addition, KBBI also provides a number of examples of these terms, namely, levels or courts, and also as stages, such as in meetings or the like.

Referring to the explanation from the KBBI, agencies can be said to be general government bodies. Therefore, not a few people tend to understand the term as an institution belonging to the government only. On the other hand, the word agency is also often added to the word government and becomes the phrase “government agency”.

However, in general, this term does not only refer to institutions owned by the government. There are also those that are not owned by the government, or refer to private institutions or are owned by individuals. So, in summary, an agency is an institution that can be owned by the government or the private sector.

Differences between Government and Private Agencies

Both government and private agencies are expected to be able to provide the best possible service to the community, although they are still profit-oriented or other predetermined goals.

Government agencies are all government agencies that carry out administrative functions in the executive environment. This also includes the central or regional scale, as well as commissions, councils and agencies that receive APBN or APBD funds.

Even though it is known as a government agency, in reality there are also agencies that are not owned by the government or are known as private agencies. Although both serve the community, government and private institutions have quite significant differences.

In addition, based on Law no. 5 of 2014 regarding the State Civil Apparatus article 1 paragraph 15, the term is defined as central and regional agencies, and both have their respective duties and responsibilities.

The accountability

While private agencies are usually institutions that are responsible to shareholders and the main director. Government agencies are all government-owned institutions that carry out administrative functions from the government in the executive environment. The implementation of the administrative function applies to both the central and regional governments.

Meanwhile, private institutions are business entities or businesses that are established and capitalized by a person or group that has the aim of obtaining maximum profits, for business development needs and returning capital.

That way, private agencies will continue to operate and compete with other private agencies in serving the needs of the community.


Private agencies are organizations owned by individuals or certain groups outside the government. Due to the use of private capital, the establishment of this institution is generally aimed at making a profit.

Generally, they get their capital through individual funds, bank loans, or buying and selling shares. Unlike government agencies, which must be transparent about capital, private agencies withhold this information because they have no business with the public.

Institution Example

Types of Institutions

As it should be the agency itself has a different focus depending on the industry, functions and responsibilities it carries out. Each type and function certainly provides a different perspective according to company needs.

Based on their functions and responsibilities, agencies can be divided into 3 types, namely vertical agencies, horizontal agencies, and supervisory agencies. Here is the full explanation.

1. Vertical Agency

Vertical agencies are non-departmental government agencies that have work environments in a number of different regions or administrative areas.

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This agency aims to divide state institutions based on their jurisdiction or position. The examples of vertical agencies are Polri, Polda, Polres, and Polsek, each of which has its own administrative area with different coverage.

2. Horizontal Agencies

Horizontal agencies carry out tasks and are separated based on the function of each institution. Generally, these agencies have an equal standing.

The purpose of having horizontal agencies is to enable certain institutions to focus on their respective duties. The institutions included in horizontal agencies are legislative, executive and judicial institutions.

3. Supervisory Agency

The supervisory agency has the duty to supervise certain work areas. For example, such as supervision of the economic sector or the agricultural sector.

Examples of Government Agencies and Private Agencies

In fact it is not difficult to find examples from government and private institutions because the community naturally comes into contact with these institutions for several purposes.

Examples of government agencies, among others:

  • Attorney General, KY or Judicial Commission
  • BPK or the Supreme Audit Agency
  • Meteorology, Climatology & Geophysics Agency or BMKG
  • BATAN or the National Nuclear Energy Agency.
  • Ministry
  • Local government

Each of these types of government institutions can later be further divided into several types, such as local government agencies and central government.

On the other hand, examples from private institutions that have the goal of making a profit are also not difficult to observe and find. Any company engaged in a particular industry or business sector can be classified as a private institution.

Examples are Astra International, HM Sampoerna, Indofood Sukses Makmur, and also Bank Central Asia or BCA.

Aiming to make a profit, the capital used in private institutions is certainly different from that owned by the government. Usually, the capital of private institutions comes from the owner’s personal funds, loans, or it could also be from the sale of shares to the public.

Private agency budget reports are also usually closed to the public. This is certainly very different from government agencies that prioritize budget transparency to the general public and become one of their responsibilities for tax utilization.

Forms of Private Institutions

We can divide this institution into several forms, which we also often call Private Owned Enterprises. The forms of private institutions, among others:

1. Sole Proprietorship

An individual business entity is an entity whose owners and managers are individuals. The person is responsible for everything that arises, both profits and losses from his business.

The characteristics of a sole proprietorship entity lies in having only one owner, relatively small business form, management based on the owner, and any losses he bears personally.

Sole proprietorships have several advantages, such as simple management, less time-consuming decision-making, the benefits of being self-owned, low taxes, and low-cost operations.

On the other hand, the drawback is, if he loses, then he is fully responsible. In addition, finances may be limited, business continuity may be threatened, or it will be difficult to operate if something happens.

2. Firm (FA)

Firm establishment is usually by 2 or more people. Each person does not only unite capital but all of his assets. Therefore, the establishment of the firm must be in the presence of a notary or under the hand.

The advantages are that everyone can work based on their expertise, applying for loans is easier, and business continuity is brighter.

The characteristics of a firm include members who know each other closely, use common names, take full risk and responsibility for the business, and each member has a veto right to enter into agreements with other parties without the need for the members’ approval.

On the other hand, firms have several drawbacks, such as differences of opinion that can hinder the production process, shared losses, and the blurring of the boundaries between personal and business assets.

3. Limited Partnership (Commanditaire Vennootschap/CV)

CV is an association founded by several people who invest. Inside the CV there are active partners (members who carry out CV’s daily duties as a business entity) and passive partners (only submitting capital).

There are quite a lot of CVs in Indonesia. This is due to the advantages that CV has, such as a fairly easy founding process, high-value capital, easy to get loans, and good management.

However, CV still has drawbacks, such as full responsibility for active members, gray business continuity, to the difficulty of attracting capital.

4. Limited Liability Company (PT)

PT is a business entity with capital in the form of shares. Shares are documents that state equity participation. Shareholders are only responsible for capital.

Later, shareholders will receive profits in accordance with the profits earned by PT. PT’s highest authority is in the General Meeting of Shareholders.

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PT consists of open and closed PT. Public PT is a PT that sells its shares on the Indonesia Stock Exchange. For example PT Unilever Tbk., PT Bank Negara Indonesia (Persero) Tbk., PT Indofood Sukses Makmur Tbk., and so on

Meanwhile, closed PTs do not sell their shares. For example, PT Solusi Finansialku Indonesia, Salim Group, Bakrie Group, and so on.

The advantages of a PT lie in the ease of obtaining capital, the ease of changing leaders, the responsibility is limited to the value of shares, and the sustainability of the company is guaranteed.

The drawbacks are that decision making takes quite a long time as an implication of limited responsibility, establishment is relatively difficult, and all company activities are reported to shareholders so that company secrets can be spread.

Advantages of Working in Government Agencies

Getting to know the culture of work for everyone is of course very necessary. This can actually help you to adapt to various changes and policies that exist within the company.

Here are some of the advantages of working in the government sector:

1. Fixed And Clear Salary

If you work in a government agency, you don’t need to worry about your monthly salary. The determination of the salary for employees working in the government has been determined in the applicable law so that the value is clear every month.

2. Get Old Age Allowances Or Pension Funds

Another plus is that you can get benefits for old age or retirement funds. You can disburse these funds when you retire or no longer work in government agencies so that your old age is guaranteed.

3. Have a lot of free time

As government employees, some of them can have free time because they only work 5 days working for 8 hours, in contrast to private employees who get to work 8 hours or more.

4. Clear career path

This job is regulated by law, so employees also get a clear career path, so that they are promoted every few periods.

Disadvantages of Working in Government Agencies

Besides the advantages, of course there are drawbacks, there are a number of things that you should take into account when working in government, especially the disadvantages that can be taken into consideration. Here are some disadvantages of working in government agencies.

1. Unable to Negotiate Salary

Because government employee salaries are regulated by law, you cannot discuss or negotiate salaries to get a higher nominal.

2. Bureaucracy

Being a government official means that you are tied to the bureaucracy, which may not suit you personally. This sometimes makes you feel uncomfortable in carrying out work.

3. Predetermined Salary

Because of the difficulty in negotiating in terms of salary, your basic salary is mediocre. Usually, it’s the perks and incentives that help you earn more.

4. Difficult to Develop

Because they are bound by the bureaucracy, employees must obey the rules that have been set. So, you can’t easily get promoted. There are a number of things that you should strive for, from the point of view of further education to several skills courses.

Advantages of Private Institution Employees

After knowing the advantages of working in government agencies, the next discussion is the advantages of private institutions. Here is the full explanation.

1. Bigger Salary

Bigger salary and can negotiate to get the desired salary according to abilities or skills. You can have more investment opportunities.

2. Self Development

It’s easy to develop yourself because the company will free its employees to work and develop their soft skills as well as their hard skills .

3. Additional Income

Can be more enthusiastic at work to earn extra income. Working in a private agency can make you get bigger incentives especially when the targets you achieve are always achieved.

4. Higher Rank

Some private agencies have a faster promotion process because most companies now prioritize performance and speed. So that the tendency for career advancement also increases.

Shortage of Employees of Private Agencies

Besides having advantages, being a private employee certainly has some disadvantages. The following are some of the disadvantages of being a private employee.

  1. Not getting a pension fund.
  2. Actually, by not getting a pension fund, you can collect money by looking for some additional funds through small businesses that don’t have many competitors.
  3. Have uncertain working hours. There are some
  4. Have the opportunity to be laid off

From the discussion above, it can be said that agencies are government and private institutions that have a function to serve the community. Thus the discussion about agencies, I hope all the discussions above are useful as well as add insight to Sinaumed’s. To get more information about institutions, Sinaumed’s can read books available at .

As #FriendsWithoutLimits we always try to give the best. To support Sinaumed’s in adding insight, sinaumedia always provides quality and original books so that Sinaumed’s has #MoreWithReading information.

Author: Yufi Cantika Sukma Divine