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Public Service Obligation = Subsidy? A Case Study From BUMN 

by Rahayu Hoed, Reagan Roy Teguh

Published: May, 2020

Submission: May, 2020


What is the Public Service Obligation (PSO)? Whose obligation is it? What is the realization of the PSO? Some of us may not be familiar with the PSO and what actually means for a country. This article provides a general understanding of the PSO and particularly, how the PSO can affect us directly.

First things first, what is the PSO? The PSO is a concept commonly adopted by all nations and as you might guess, it is the obligation of the government to serve the public. A simple internet search for the PSO will easily reveal and teach us about this concept. What about Indonesia? Does Indonesia recognize this concept?

Indonesia’s 1945 Constitution recognizes the PSO under Article 34 (3) according to which, the government is responsible for providing people decent/appropriate health facilities and public services. The government has also issued Law No. 25 of 2009 on Public Services in view of, among other legislation, Article 34 (3) of the 1945 Constitution, the main objective of the Law is to ensure the provision of appropriate public services in accordance with the good governance principles and the applicable rules and regulations, also to provide people legal protection and certainty about the provision of public services.

The Law on Public Services applies to government institutions, State Owned Enterprises (SOE or BUMN – Badan Usaha Milik Negara), and Region Owned Enterprises (BUMD – Badan Usaha Milik Daerah) which budget or capital is derived from the state treasury and allocated annually under the State Income and Costs Budget (Anggaran Pendapatan dan Belanja Negara – APBN).

Coming back to the PSO, in addition to BUMN’s obligations under the Law on Public Services, the BUMN Law (Law No. 19 of 2003) actually provides for a specific chapter on the PSO containing just one Article, Chapter V and Article 66, respectively. Under the article, the government may give a specific assignment to a BUMN for the public benefit while still adhering to the BUMN’s purpose and objectives, and the specific assignment requires prior written approval from the BUMN’s General Meeting of Shareholders (GMS).

Interestingly, according to the elucidation of Article 66, if the specific assignment is not financially viable, the government must cover all the costs that the BUMN incurs, including the expected margin.

Please read the complete advisory below.



M&T Advisory is an email publication prepared by the Indonesian law firm, Makarim & Taira S. It is only intended to inform generally on the topics covered and should not be treated as a legal advice or relied upon when making investment or business decisions. Should you have any questions on any matter contained in M&T Advisory, or other comments generally, please contact your usual M&T contact or [email protected].


Reagan Roy Teguh: [email protected]
Rahayu N. Hoed: [email protected]

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