Based on the assessment of the Independent Consultant regarding GCG implementation within the Board of Commissioners in 2017, an assessment score of 98.86% equivalent to “Very Good” rating was awarded.

Dear shareholders,

First and foremost, let us praise Allah SWT, for His abundant grace and mercy, the Board of Commissioners has managed to report its duties and obligations in providing supervision and advice to the Board of Directors in managing and developing the Company throughout 2017, with the following explanatory points:

CHANGES IN THE COMPOSITION AND CHANGES IN THE BOARD OF COMMISSIONERS’ DIVISION OF DUTIES

We shall begin our report on the execution of duties and responsibilities of the Board of Commissioners, that in 2017, there are changes in the composition of the Company’s Board of Commissioners. An important aspect we would like to note that in 2017, based on the resolution of AGMS on March 15, 2017, it was decided to dismiss Taufik Widjoyono, a member of the Board of Commissioners who began his retirement as Secretary General of the Department of Public Works and Public Housing, and replaced him with appointing a new member of the Board of Commissioners, Sugihardjo, currently serving as Secretary General of Transportation Department, and therefore the composition of Board of Commissioners is as follows:

  1. President Commissioner/Independent Commissioner: Refly Harun
  2. Independent Commissioner: Sigit Widyawan
  3. Commissioner: Boediarso Teguh Widodo
  4. Commissioner: Sugihardjo
  5. Commissioner: Agus Suharyono
  6. Commissioner: Muhammad SaptaMurti

In relation to the composition change within the Board of Commissioners and the Board of Directors, the Board of Commissioners has regulated and reorganized the description of duties and responsibilities of every member of the Board of Commissioners, and stipulated them in the Decree of the Board of Commissioners No. KEP-087/IV/2017 dated April 27, 2017 regarding Revision of Division of Duties of the members of the Board of Commissioners of PT Jasa Marga (Persero) Tbk. The regulation and organization of such duties and responsibilities are conducted in order to maintain and improve the effectiveness and efficiency of the Board of Commissioners’ function to oversee and provide advice to the Board of Directors in managing and developing the Company.

THE PERFORMANCE OF THE BOARD OF COMMISSIONERS

WORK PROGRAM, MEETING, MEETING FREQUENCY AND THE BOARD OF COMMISSIONERS’ WAY IN GIVING ADVICE TO THE BOARD OF DIRECTORS

In commemorating the execution of the Board of Commissioners’ duties and responsibilities for the 2017 fiscal year, an annual working plan of the Board of Commissioners was set in 2017 which includes monthly meeting agenda of the Board of Commissioners for the whole year and working visit to Company’s Branches including to new toll road projects which are still under construction near the visited branches. Every month, the Company holds at least 2 (two) meetings i.e. the Board of Commissioners meeting and the coordination meeting between the Board of Commissioners and the Board of Directors. In the event of corporate action or urgent matter to be discussed and decided, it is always possible to hold a special meeting between the Board of Commissioners and the Board of Directors. With the formulation of the work program, implementation of supervision and counseling to the Board of Directors becomes more effective and on target.

Throughout 2017, the Board of Commissioners conducted 13 meetings and 10 visits to the Branches and Toll Road Subsidiaries, one preparatory meeting for GMS, one AGMS on March 15, 2017, and 14 Coordinating Meetings between the Board of Commissioners and the Board of Directors. The above number also includes 3 coordination meetings between the Board of Commissioners and the Board of Directors organized by the Board of Directors. In every meeting, the meeting invitation was signed by the President Commissioner, stating the event/agenda, date, time and meeting venue, and it was always chaired by the President Commissioner. In the event that the President Commissioner was unable to chair the meeting, the President Commissioner appointed one of the members of the Board of Commissioners to preside over the meeting. The average attendance rate of members of the Board of Commissioners was above 86%. All meeting decisions were taken by deliberation for consensus. If deliberation for consensus was not reached, the decision was then taken by valid voting rights, which are more than ½ (one half) of the total valid votes cast in the meeting. Every decision in the meeting was monitored and its follow-up was evaluated.

Until the end of 2017, over 94% of meeting decisions (129 of 137) were followed up and finalized and the remaining 6% (8) are still in the process of completion; by the beginning of 2018, they are expected to be resolved except for legal issues which take quite a long time.

At every meeting of the Board of Commissioners and coordination meeting of the Board of Commissioners inviting the Board of Directors, minutes of meeting were signed by all members of the Board of Commissioners and/or the Board of Directors present and they were submitted to all members of the Board of Commissioners and the Board of Directors. As a corporate document, minutes of meeting are properly administered by Corporate Secretary and Secretary of the Board of Commissioners.

PERFORMANCE EVALUATION OF THE BOARD OF COMMISSIONERS AND COMPLIANCE IN IMPLEMENTING GOOD CORPORATE GOVERNANCE

Performance Evaluation of the Board of Commissioners 2017

As in previous years, at the time of the establishment of the Board of Commissioners’ Annual Working Plan, it was also set and determined 2017 Key Performance Indicator (KPI) of the Board of Commissioners. This document shall be used to review and evaluate the performance of the Board of Commissioners, whose draft refers to the Regulation of the Minister of SOE No. 01/MBU/2011 dated August 1, 2011 on Implementation of Good Corporate Governance in SOE, further specified in Decree of the Secretary of Ministry of SOE No. SK-16/S.MBU/2012 dated June 6, 2012 on Indicators/ Parameters of Assessment and Evaluation of Good Corporate Governance Implementation. The 2017 KPI of the Board of Commissioners states that the performance score achieved was rated “A” (Very Good, 4.5-5.0).

At the end of 2017, with a reference to the current selfassessment system of the Board of Commissioners’ performance, the set targets was achieved, i.e. rated “A” with an assessment score of 4.92. This achievement has improved from the 2016 achievement of 4.77. The Board of Commissioners is determined to work better and harder, in the hope that it will be able to maintain its performance in 2017.

Evaluation on Implementation of Good Corporate Governance 2017

In relation to the execution of duties and responsibilities to provide oversight and advice to the Board of Directors in managing the Company, the Board of Commissioners consistently sets forth the application of Good Corporate Governance (GCG) principles. Every year, the application of these principles is evaluated and assessed by an Independent Consultant appointed by the Board of Directors with the approval by the Board of Commissioners.

Based on the assessment of the Independent Consultant regarding GCG implementation within the Board of Commissioners in 2017, an assessment score of 98.51% equivalent to “Very Good” rating was awarded, a slight decrease from the 2016 GCG assessment score of 99.36%.

The Board of Commissioners will consistently apply the GCG principles effectively, efficiently, sustainably and deeply in carrying out its oversight duties, with the objective to encourage all levels in the Company’s to achieve Company’s Vision and Mission, both of toll road and nontoll road business, which will benefit all stakeholders. Thus, the Company will possess a strong capability and competitiveness to grow nationally and regionally, and to make the Government programs successful in accelerating the development of national infrastructure, especially the toll roads in Java, Sumatra, Kalimantan and Sulawesi.

REVIEW ON THE COMPANY’S BUSINESS PROSPECT DEVELOPED BY THE BOARD OF DIRECTORS

Development Plan of the Company

In relation to the Company’s development plan as stated in the 2013-2017 Company Long Term Plan (RJPP), concerning the target achievement up until the 5th year of RJPP i.e. 2017, the Board of Commissioners recommends that the Company accelerates and completes the 2017 target of new toll road development immediately, and several new programs that cannot be accommodated in the 2017 RKAP shall be included in the 2018 RKAP, as the first year of 2018- 2022 RJPP, which is currently under discussion by the Board of Commissioners and the Board of Directors, and is targeted to be approved and established before end of 2017.

In the context of discussing the development of strategy to increase Company’s value set as a consideration to establish the Company’s vision and mission as as the basis of strategic direction of preparation of 2018-2022 RJPP, the Board of Directors invited the Board of Commissioners on March 04, 2017 to listen to a presentation by the Consultant and provide inputs. The Board of Directors then summarized the discussions on March 04, 2017 and reorganized the development of strategy to increase the Company’s value to discuss it with the Board of Commissioners on August 10, 2017. Key points of the discussion covered: (1) transformation and its process (2) vision and mission (3) strategic direction and strategic direction of lines of business and its business model (4) the role and scope of work and the division of roles and responsibilities of JSMR group (5) the potential grouping of functions according to strategic direction (6) the potential of long-term and short-term JSMR organizational structure (7) the potential for establishing holding structures of SOE Construction and Toll Road and the potential takeover of toll road and non-toll road business and (8) the potential of JSMR organizational structure without any business alignment of SOE Holding and the alignment (9) of potential JSMR organizational structure with the SOE Holding (10) JSMR Financial Projection Scenario (without divestment).

The Board of Commissioners generally accepted the Board of Directors’ explanation regarding the basic concepts of policies and strategies for the proposed 2018-2022 Company Long Term Plan (RJPP) and requested the Board of Directors to prepare a communication strategy to the public related to the Company’s financial projection 2018 and 2019, and to prepare corporate measures to maintain the growth of Company’s target profit. Further, in the coordination meeting between the Board of Commissioners and the Board of Directors on September 27, 2017, the Board of Commissioners received a review of RJPP 2013- 2017 implementation as well as key recommendations of the policy and strategy for the preparation of 2018-2022 RJPP and reaffirmed the need for the Board of Directors to prepare public communication materials and strategies on 2018-2022 RJPP and approved the key policies and strategies, and program targets for the preparation of 2018 RKAP.

The Company’s development plan as illustrated in the RJPP 2018-2022 was finally approved by the Board of Commissioners on November 27, 2017 after the Board of Directors submitted financial projection scenarios and discussed them with the Board of Commissioners during the coordination meeting between the Board of Commissioners and the Board of Directors on November 27, 2017. In the same occasion, the Board of Commissioners also approved principally the proposed RKAP 2018 (as the first year and RJPP 2018-2022).

Changes in Business Environment that Significantly Affect the Company’s Business

In addition to the issues of SOE holding establishment that will have a major impact on the Company’s business, the Board of Commissioners requested the Board of Directors that they should also anticipate the preparation and provision of the Company’s resources, appropriate, effective and efficient policy and strategy, including risk management and its mitigation, so that the targets formulated in RJPP 2018- 2022 will be achieved successfully, namely in connection with the Government’s program to accelerate the development of infrastructure, especially related to the provision of transportation facilities and infrastructure, which requires the Company’s support and involvement as one of Government’s great and reliable SOE.

One of the programs that have involved Jasa Marga is the construction of Jakarta-Bandung Rapid Railway and LRT constructed along Jasa Marga toll road corridors, as well as accelerated completion of potential Trans-Java toll road section. In order to undertake acquisitions of undeveloped toll road sections. The Board of Commissioners therefore requested the Board of Directors to review deeper and thoroughly regarding their legal, technical and financial aspects, risks and its mitigation as well as prospects.

The above matters will undoubtedly affect the number of toll road users and the Company’s financial liquidity, during project construction and its operation, and as long as recovery cost or break-even point period has not been achieved. In addition, the impact of Government policy to accelerate implementation of land acquisition required for the construction of National Strategic Project (PSN) also includes Jasa Marga toll road project, with the provision of land bridging facility. In executing the utilization, the administration process carries a considerable risk. The Board of Commissioners therefore decided that the Board of Directors shall encourage the acceleration of administrative settlement and conduct risk assessment of land bridging payment, as well as risk assessment of participation in Jakarta-Bandung Rapid Railway project, LRT. The outcome of such evaluation shall become an integral part of the Board of Commissioners’ approval on the Board of Directors’ next actions.

In addition to the issues outlined above, the Board of Commissioners also asked the Board of Directors to focus on fulfilling the needs of professional employees and employees with integrity for subsidiaries of the new toll roads that will or are currently under construction, in the hope that the Company’s management will run effectively and efficiently in generating revenues and profits, and a good number of professional and experienced employees in the field of supervision, so that the toll road business shall be run ethically and meet the provisions of governance.

RKAP AND THE APPOINTMENT OF PUBLIC ACCOUNTING FIRM

RKAP 2018

In meeting the provision of Company’s Articles of Association article 15 paragraph 2 letter b2 i.e. the Board of Commissioners’ obligation to provide opinion and approval on the proposed RKAP prepared and submitted by the Board of Directors, in a coordination meeting between the Board of Commissioners and the Board of Directors on November 27, 2017 principally approved the RKAP 2018 by issuing letter of the Board of Commissioners No. DK-202/ XI/2017 dated November 27, 2017 on the Approval and Ratification of RKAP, PT Jasa Marga (Persero) Tbk. 2018. The approval of the Board of Commissioners came 2 (two) months earlier than the provision stipulated in article 17 paragraph 4 of the Company’s Articles of Association. The preparation of RKAP 2018 has included an observation and alignment of shareholders’ aspirations as stated in letter of the Deputy Caretaker of Construction Business and Transportation Facility and Infrastructure, Ministry of State Owned Enterprises No. S-19/D4.MBU/10/2017 dated 23 October 2017. Accordingly, the Board of Commissioners also examined, reviewed and approved the proposed revised RKAP 2017: the 1st (first) revision in the coordination meeting of the Board of Commissioners and the Board of Directors on March 12, 2017 and the 2nd (second) in a special meeting of the Board of Commissioners on November 09, 2017.

KAP to Audit the Company’s Consolidated Financial Statements

Fiscal Year 2017

To conduct audit on the Company’s Financial Report Fiscal Year 2017, the Board of Commissioners, after considering the evaluation outcome of the Audit Committee on the performance of Public Accounting Firm (KAP), declared the 2016 fiscal year audit appropriate and decided to reappoint KAP Purwantono, Sungkoro & Surja which cooperates with Ernst & Young Global Limited (hereinafter referred to as KAP E&Y). In relation thereto, the Board of Commissioners prepared the procurement schedule and established a Price Negotiation Committee. To anticipate the risk of fail negotiation, the Board of Commissioners proposed to the 2016 AGMS held in March 2017, to delegate the authority to appoint KAP to the Board of Commissioners after obtaining prior approval from the Dwiwarna A Series Shareholders.

Next, the Price Negotiation Committee formulated Term of Reference and audit fee, which aim to obtain more efficient cost calculation by combining the audit of Jasa Marga Head Office with the audit of all of its subsidiaries simultaneously

After negotiating the cost of service with KAP E&Y and based on the Report from the Chair of Price Negotiation Committee for Public Accounting Services in the Context of Public Audit of PT Jasa Marga (Persero) Tbk. Fiscal Year 2017 No. 10/ PAN/KAP-2017/III/2017 on March 2, 2017 on Report of the Outcome of Contract Price Negotiation of Public Accountant Service in the context of Public Audit of PT Jasa Marga (Persero) Tbk. Fiscal Year 2017, the Board of Commissioners appointed and assigned the Public Accounting Firm to conduct an audit of fiscal year 2017 with a contract fee for general audit service of Rp4,900,000,000 (four billion, nine hundred million rupiah) including 10% VAT and Out of Pocket Expenses (OPE) of a maximum Rp853,600,000 (eight hundred fifty three million, six hundred thousand Rupiah). In accordance with article 16 paragraph (7) and article 20 paragraph (2) of the Company’s Articles of Association, the Board of Directors are required to propose the Public Accountant Firm to Jasa Marga AGMS Fiscal Year 2016 on March 15, 2017 to be approved and established to conduct a general audit on PT Jasa Marga (Persero) Tbk. Fiscal Year 2017 including its 22 subsidiaries. The appointment was also reported by the Board of Commissioners to the Minister of SOE as the Dwiwarna A Series Shareholders, with letter no.DK 047/III/2017 dated 07 March 2017.

With the majority vote, the AGMS Fiscal Year 2016 dated March 15, 2017 approved and decided to appoint Public Accountant Firm Purwantono, Sungkoro & Surja (KAP E&Y) to audit the Company’s Consolidated Financial Report and Financial Report of the Company’s Partnership and Community Development Program for Fiscal Year 2017.

Fiscal Year 2018

The procurement plan of KAP fiscal year 2018 in the context to conduct audit on the Company’s Consolidated Financial Statements Fiscal Year 2018 and the Annual Work Plan and Budget (RKAT) of 2018 Partnership and Community Development Program, in the Board of Commissioners meeting on August 10, 2017, after considering evaluation result from the Audit Committee on the performance of KAP E&Y in 2017 which was regarded not as expected, has decided to procure KAP audit of Company Report Fiscal Year 2018 through a bidding process and it shall be implemented immediately. Accordingly, the Board of Commissioners with the decree of the Board of Commissioners No. KEP 161/IX/2017 dated September 14, 2017 established a Procurement Team for Public Accounting Firm Service of PT Jasa Marga (Persero) Tbk. for Fiscal Year 2018.

In its meeting on September 20, 2017, the Board of Commissioners received a progress report on procurement of KAP for audit Fiscal Year 2018 and requested that the procurement schedule shall be on time. In the report to the Board of Commissioners meeting on November 20, 2017, the Chair of the Audit Committee as the Chair of the Procurement Committee of KAP for the 2018 audit, submitted the procurement progress. In order to have more and qualified bidders, the Chair proposed the need to change the criteria for experience, i.e. previously stated that it shall include audit of assets of Rp60 trillion to Rp50 trillion, the Board of Commissioners approved this suggestion and emphasized that the procurement of KAP must be completed before February 2018.

MONITORING IMPLEMENTATION OF COMPANY’S STRATEGY

The Board of Commissioners monitored and evaluated the Board of Directors’ performance in executing the Company’s strategy formulated in the 2013-2017 RJPP and realized through RKAP achievement in particular 2017 RKAP as the fifth fiscal year RKAP, which was also used as an input in preparing and setting 2018-2022 RJPP and RKAP Fiscal Year 2018.

In line with that, an oversight is also conducted on compliance with laws and regulation, GCG principles, as well as providing necessary advice and recommendation. The above monitoring and evaluation was conducted by the Board of Commissioners through the Board of Commissioners meeting forums and coordination meetings with the Board of Directors, as well as working visits to Company’s branches and/or to several Jasa Marga under construction toll road projects and early-phase operational toll roads

In 2017, the Board of Commissioners focused on improving the effectiveness of internal control by the Board of Directors and the Internal Audit Unit of Toll Road Subsidiaries (APJT) and Other Business Subsidiaries (APUL) as well as the Company’s branches. The Board of Commissioners also reviewed audit report of external auditors and oversaw the follow-ups of the external auditor recommendation, as well as recommendations from the Board of Commissioners submitted during the Board of Commissioners’ visits to the branches, APJT and APUL.

In the context of running the Company’s management to realize the program goals targeted in RKAP 2017, the Board of Commissioners considered that the corporate actions conducted by the Board Directors have complied with the provisions of laws and regulations and did not deviate from the RKAP as described in the preceding description of the Board of Directors’ performance appraisal in managing the Company and the basis of this assessment, point 5 regarding evaluation and assessment of the Board of Directors’ compliance in running the Company was in accordance with 2017 RKAP and 2013-2017 RJPP. Other corporate measures taken by the Board of Directors as set forth in the 2017 RKAP, namely undertaking investment and operational cooperation with other parties for the construction of new toll roads or other business development, the provision of shareholder loan, medium term loan, share divestment the issuance of PUB and global bonds, undertaking bank loan, securitization of toll roads, establishing subsidiaries and other matters, are in accordance with the provisions stipulated in the Company’s Articles of Association of article 12 paragraph 7 letter i point (a) to (o) and letter ii and iii.

EVALUATION OF THE BOARD OF DIRECTORS’ PERFORMANCE IN MANAGING THE COMPANY AND ITS BASIS OF EVALUATION

In addition to self-assessing performance through a selfassessment method, the Board of Commissioners also conducted assessment of of the Board of Directors’ performance in managing the Company. The basis in assessing the Board of Directors’ performance refers to Regulation of Minister of SOE No. 01/MBU/ 2011 dated August 1, 2011 on Implementation of Good Corporate Governance in SOE and Decree of the Secretary of Ministry of SOE No. SK-16/S.MB/2012 dated June 6, 2012 on Indicator/Parameter of Assessment and Evaluation of Good Corporate Governance Implementation, Appendix I/6-15, the Aspect of Testing/Indicator Item 17 Parameter No. 58 and 59, and the Aspects of Testing/Indicator Item 19 Parameter No. 67. Besides that, the assessment on the members of the Board of Directors also observes Regulation of the Minister of SOE No. PER-03/MBU/02/2015 dated February 17, 2015 regarding Requirement, Procedure for Appointment and Dismissal of Members of the SOE Board of Directors, Appendix CHAPTER II on Requirement for Members of the SOE Board of Directors Item B on Material Requirement. The assessment implementation on the members of the Board of Directors 2017 is conducted through Letter of the Company’s President Commissioner No. DK–0190/A/XI/2017 dated November 09, 2017.

The methods used to assess the performance of the Board of Directors are through evaluation of the Quarterly Corporate Management Report 2017 and the Board of Directors ‘compliance towards 2017 RKAP and/or 2013-2017 RJPP, and the Board of Directors’ performance in executing the decisions from the Board of Commissioners’ meetings, the coordination meeting between the Board of Commissioners and the Board of Commissioners and the Board of Directors, and following-up recommendations from the results of external auditor audit, and compliance towards the provisions set forth in the agreement with the Third Parties.

Visitation from PT Jasa Marga (Persero) Tbk. Board of Commissioners and Committee Members at Balikpapan-Samarinda Toll Road on Saturday, 18 November 2017.

  1. Evaluation and Assessment on the Board of Directors’ Performance in Achieving Key Performance Targets 2017 based on the Company’s Quarterly Corporate Management Report 2017
    1. Corporate Key Performance assessed based on the following perspectives: (1) finance and market, (2) product and process effectiveness (3) focus of workforce (4) leadership, governance and community responsibility
    2. Financial Performance, which consists of achieving Return on Equity (ROE) and Interest Coverage Ratio (ICR)
    3. Development Performance, which consists of performance of (1) asset growth and (2) progress of the execution of new toll road projects and other business development
    4. Operational Performance which consists of: (1) realization of transaction traffic volume , (2) toll revenue, (3) meeting of Minimum Service Standard
    5. Performance of Human Resource (HR) and General Affairs, which consists of (1) fulfillment of competencies and (2) Corporate Social Responsibility (CSR) programs

    In accordance with the organizational structure of Jasa Marga based on the results of Extraordinary GMS 2016, including changes to nomenclature of the Board of Directors, namely operational performance under the responsibility of Operation Director II. The matters concerning risk & quality, and legal & compliance are under the responsibility of Finance Director. The matters concerning information technology & business management are entirely under the responsibility of Operations Director I.

    Based on the results of the Board of Commissioners evaluation, the corporate key performance was fairly good, financial performance was well achieved, development performance did not achieve its the target, mainly because toll road project implementation and other business development were below target. Operational performance was fairly good, in which the performance of transaction traffic volume was well achieved, and the fulfillment of SPM was on target. The performance of Human Resource & General Affairs in fulfilling the competencies has achieved the target, but the achievement of CSR program was still below target.

  2. The Evaluation and Assessment of the Board of Directors’ Performance in Executing the Decisions from the Board of Commissioners’ Meetings and the Board of Commissioners’ Coordinating Meetings with the Boards of Directors

    Based on monitoring of the meeting decisions needed to be followed up in 2017, we can conclude that most of the meeting decisions have been completed by the the Board of Directors while a few are still in the process of follow-up. Until the end of November 2017, out of 137 (one hundred and thirty seven) meeting decisions, 129 (one hundred and twenty-nine) decisions/issues or 94% have been completed and 8 (eight) or 6% are still in the process of follow-up.

  3. Evaluation and Assessment on the Board of Directors Performance in Following-up Recommendations/Suggestions on the Findings Reported by External Auditors

    Based on the evaluation of the Board of Directors’ explanation with regards to Independent Auditor Report Fiscal Year 2016, the Board of Commissioners concluded that the Board of Directors have followed up the findings and advices recommended by the Auditor (KAP). Nevertheless, the Board of Directors was required to submit evidence on the implementation of the follow-ups to the findings. In addition, the Board of Directors was also requested to explain several matters related to operationalization of toll road sections, i.e. use of traffic projection application, electronic data transaction that has not been connected, the Board of Directors’ measures to overcome the time lags of electronic transaction data reconciliation including reviewing the possibility of applying payment gateway and so forth.

  4. Evaluation and Appraisal on the Board of Directors’ Compliance in Running the Company in Accordance with the Provisions of Applicable Law and Regulation and/or the Provisions Set in Agreement with the Third Parties

    In general, the Board of Commissioners assessed that the Board of Directors’ compliance in running the Company has been in accordance with the provisions of applicable laws and regulations and they have executed appropriately the provisions set in agreements with the Third Parties. In the event of any irregularities or legal issues, the Board of Directors will conduct both legal and non-legal reviews, and take legal settlement to meet aspects of governance, as well as to prepare any necessary follow-up and risk mitigation measures.

  5. Evaluation and Assessment of the Board of Directors’ Compliance in Running the Company in Accordance with 2017 RKAP and 2013-2017 RJPP

    The Board of Commissioners assessed that the Board of Directors’ compliance in running the Company in accordance with 2017 RKAP and 2013-2017 RJPP has been properly executed. This is based on several following points:

  6. In fiscal year 2017, in support of the Government’s program to accelerate infrastructure development, in particular the construction of new toll roads and the facilities and infrastructures of transportation related to Jasa Marga’s business, e.g. the construction of Bekasi-Cawang-Dukuh Atas LRT integrated with Cibubur-Cawang LRT, Jakarta-Bandung Fast Train, the acceleration of completion and operation of Trans-Java Toll Road scheduled for 2019, and the acceleration of new toll road section development in Sumatra, Kalimantan, and Sulawesi; all of these challenges require the Management to respond with corporate measures, in terms of finance, business development and with the provision of human resources. In some cases, activity programs that must be executed have not been incorporated in 2017 RKAP and/or 2013- 2017 RJPP. If they have not been incorporated in both documents, they shall be included in the programs of 2018 RKAP and 2018-2022 RJPP.

    Hence, in the coordination meetings between the Board of Commissioners and the Board of Directors held at Jasa Marga Head Office dated March 12, 2017 has decided to revise the first RKAP of Fiscal Year 2017. The revisions were needed to finance the need for an increased investment, corporate actions to restructure finance, divestment of shares in toll road subsidiaries (PT Trans Marga Jateng and PT Jalan Lingkar Baratsatu) and to add allocation of capital expenditure in line with the construction of Jakarta-Cikampek Elevated Toll Road, as well as to accommodate Shareholders’ aspiration into letter of the Minister of SOE No. S-51/D4.MBU/11/2016 dated November 14, 2016. Furthermore, the revised 2017 RKAP was executed to accommodate the decisions made in the coordination meeting between the Board of Commissioners and the Board of Directors on July 20, 2017 regarding the plan development to establish a Trans-Java sub holding company, and considering that there were many activity plans in 2017 RKAP that have not been achieved and new proposed activity plans came up.

    The Board of Commissioners has also received the Board of Directors’ reports regarding financial statements and the Prognosis of Financial Statements until December 2017 and measures taken by the Board of Directors in order to maintain the Company’s 2017 financial target achieved. The second Revision of 2017 RKAP was approved by the Board of Commissioners on November 13, 2017.

The assessment of each member of the Board of Directors 2017 was conducted by the Board of Commissioners with letter of the Company’s President Commissioner No. DK0190/A/XI/2017 dated November 9, 2017 and the results will be reported to the Shareholders at the 2017 GMS.

REVIEW ON CORPORATE GOVERNANCE IMPLEMENTATION

COMPLIANCE TOWARDS LAWS AND REGULATIONS AND INTERNAL CONTROL

The Board of Commissioners always encourages the Board of Directors in managing the Company to always comply with and/or fulfill the laws and regulations, and the principles of good corporate governance, as well as the provisions stated in the document agreements with the third parties. Therefore, prior to the Annual GMS, the Board of Commissioners assisted by the Audit Committee conducted research and evaluation on the initial report of audit findings by KAP, which for the fiscal year 2016 was conducted by KAP E&Y. The objective was to make sure whether the audit findings were actually occurred due to the Board of Directors’ negligence or due to the lack of explanation and/or clarification and/ or documents/data submitted to the Auditor, or the lack of Auditor’s understanding on the issues and solutions that the Directors had taken. The results from the Board of Commissioners’ review will be discussed with the Board of Directors, so that the Company’s consolidated financial statements and the realization report of Partnership and Community Development Program submitted and accounted for in the 2016 GMS in the middle of March 2017, were really appropriate and could be accounted for financially and legally

Following the GMS, the Board of Commissioners shall monitor the recommendations from KAP based on the findings: whether the Board of Directors have followed up those recommendations. In addition, the Board of Commissioners constantly monitors and emphasizes that the existing findings should not be repeated to the Board of Directors.

During the Board of Commissioners’ meeting in the beginning of February 2017, the Board of Commissioners received an Audit Committee report which includes 5 (five) issues from fiscal year 2016 audit and 2 (two) of them remain as findings. Thus, the coordination meeting between the Board of Commissioners and the Board of Directors in March 2017 summarized the final results of KAP Audit for fiscal year 2016 as follows:

  1. Compliance towards the Laws and Regulations, in example reconciliation of toll revenue.
  2. Compliance towards Internal Control
    1. Improvement of legal document
    2. Improvement of procurement process and monitoring contracts.
    3. Updating data of traffic volume.

Based on the above findings, the Board of Commissioners continues to monitor the follow-ups of its settlement, among others, in the Board of Commissioner meeting in June 2017, the Board of Commissioners requested the Board of Directors to explain the following matters:

  1. The use of traffic projection application by independent consultants every year.
  2. The electronic transaction data which are not yet connected.
  3. Measures taken by the Board of Directors to resolve the issue of time lags of electronic transaction data reconciliation.

In the coordination meeting between the Board of Commissioners and the Board of Directors on June 20, 2017, the Board of Commissioners requested the Board of Directors to continue the follow-up actions on the following matters:

  1. The Establishment of Integrated Operation Control and Monitoring Team on interconnected toll roads
  2. The completion of the amendment of agreement to ignore or exclude the liability restriction on financial ratio
  3. The review on the use of traffic projection application with independent consultant and report them in the next Board of Commissioners and the Board of Directors meeting.

To prepare audit implementation fiscal year 2017, in the Board of Commissioners’ meeting in November 2017, the Board of Commissioners recommended that the Annual Audit Work Program (PKAT) shall be prepared with regard to high risk areas in accordance with the Risk & Quality Management Division report, encourage the Internal Audit Unit to be more intensive in clarifying the existing findings, and to involve the Audit Committee in preparing PKAT

IMPLEMENTATION OF GOOD CORPORATE GOVERNANCE PRINCIPLES

For fiscal year 2017, to assess the consistency of the Board of Commissioners and the Board of Directors in applying the principles of good corporate governance, 2017 GCG self-assessment process was started in the beginning of November 2017, conducted by a Team from Jasa Marga Head Office, assisted and supervised by an Independent Consultant. The Board of Commissioners was requested to submit 23 documents related to GCG implementation, consisting of 34 questions, including follow-ups on recommendations submitted by the Independent Consultant who conducted the assessment in 2016.

The results of self-assessment were submitted in the middle of December 2017, with the following achievements:

Jasa Marga97.17%
Jasa Marga Board of Commissioners98.86%
Jasa Marga Board of Directors97.37%

All three achieved “Very Good” rating but the achievement of the Board of Commissioners was slightly decreased compared to that in 2016 which was 99.36% due to the delay in delivery of notification letter to OJK regarding changes of personnel in Audit Committee and not submitting the reports of members of the Board Commissioners/Committee participating in training and/or training programs and/or seminars in the country and abroad.

In line with the consistent implementation of good corporate governance, in 2017, the Board of Commissioners and the Board of Directors reviewed and updated the Code of Corporate Governance and the Code of Conduct, and every member of the Board of Commissioners and the Board of Directors agreed and signed both documents.

In addition, the Board of Commissioners also conducted a self-assessment on the performance of the Board of Commissioners in 2017 with the achievement of 4.92 from a maximum score of 5.0 with “Very Good” rating. The above score increased from that of 2016 which was 4.77. The Audit Committee Charter was also updated with a Decree of the Board of Commissioners No. KEP-204/XII/2017 dated December 4, 2017.

IMPLEMENTATION OF WHISTLE-BLOWING SYSTEM/WBS

The Board of Commissioners pays a great attention to corporate risks, particularly fraud risks that may occur in running both toll road and non-toll road businesses. Therefore, the Board of Commissioners stresses the need to establish an effective prevention mechanism of fraud-related activities within guideline of risk management implementation based on internal control framework that may include: (a) environment control (b) activity control (c) risk assessment (d) information and communication (e) monitoring.

The development of whistle-blowing procedure should continue to be developed by the Board of Directors by cultivating compliance towards a mutually agreed code of ethics, improving the effectiveness of detection procedure, investigating violations on compliance, and mechanism of communication on violation within the Company.

The Board of Commissioners approved of placing ifeedback box at the Board of Commissioners office and facilitated the Secretariat of the Board of Commissioners with a special email as a direct complaint channel to the Board of Commissioners for any indications of fraud/cheating. The Audit Committee was also assigned to review and evaluate whistle-blower reports from the Board of Directors and report them to the Board of Commissioners to be discussed and followed-up by the Board of Directors.

CONCLUSION

In conclusion, the Board of Commissioners would like to thank all stakeholders for their attention, participation and cooperation in supervising and fostering Jasa Marga, so that Jasa Marga can grow fast and provide benefit to all stakeholders, and to contribute to the acceleration of infrastructure development currently undertaken by the Government, in particular the toll roads. The Board of Commissioners continues to increase its commitment to guard so that the vision and mission of Jasa Marga until 2022 shall be well achieved, i.e. to be a consistently growing company and increasing its value by operating. The Company also contributes indirectly to increading investment and improving effectiveness and efficiency of goods and service distribution, which in turn will reduce prices and create equitable justice for all Indonesian people.