Report of the Board of Directors

Subakti Syukur

President Director

Esteemed Shareholders and Stakeholders,

Praise to God Almighty that He bestowed his grace onto all of us that enabled Jasa Marga to still record a good performance in the midst of recovery from the COVID-19 pandemic as well as the Russia-Ukraine conflict that triggered a rise in commodity prices and high inflation, especially in developed countries. Though the global economy experienced some turbulence, Indonesian economic recovery was considered relatively good and stable.

The Board of Directors with all levels of management and employees are always committed to give their best so that the Company’s generally set targets are achieved. Furthermore, allow us to submit a Consolidated Annual Report of Jasa Marga for the financial year ending on December 31, 2022.

Economics and Industry Overview in 2022

The Indonesian economy grew impressively by 5.7% (YoY) in 2022 and the national economy grew 1.8% (QoQ). Even the constant price Gross Domestic Product (GDP) was much higher than before the pandemic at Rp2,976.8 trillion. This achievement indicated that the trend of Indonesia’s economic recovery has continued and is getting stronger.

Based on the statement of the Coordinating Minister for the Economy, Indonesia’s economic growth in the second quarter of 2022 was relatively better compared to other countries. The two engines of world economic growth, namely China and the United States, are in a stationary situation and the Government hopes that in the long run this will not have an impact on the ASEAN economy.

"To become the Largest, Trusted and Sustainable National Toll Road Company, the Company has implemented 6 strategies that focus on fundamental improvements; main business development; related business development; portfolio financing and arrangement; organization, human resources, and capabilities; and technology."

Consumption and export spending were the main pillars of economic growth this quarter. The Government’s policy of allowing people to travel home on Eid Al-Fitr last May has stimulated public consumption very strongly and generated economic turnover throughout Indonesia. A significant contribution to growth also came from the impressive performance of Indonesia’s exports. Apart from the increase in commodity prices, the strengthening of output capacity in various sectors also contributed to an increase in Indonesian exports.

Spatially, economic growth in all regions was still growing positively. Economic disparities between regions were also decreasing. Economies outside Java, such as Maluku and Papua, grew significantly by up to 13%. The Balinese economy also began to grow, reaching 3.9%.

Economic growth from the demand side was also reflected in growth from the sectoral side. The Processing Industry as the biggest driver of growth continued to grow positively by 4.0% (YoY). In addition, the Transportation and Warehousing as well as Accommodation & Food & Drink sectors grew by 21.3% and 9.8% respectively driven by easing of travel requirements and Eid Al-Fitr celebrations. Spatially, economic growth in all regions was still growing positively and economic disparities between regions were decreasing.

Growth is expected to continue as reflected in the positive performance of various leading economic indicators. The consumer confidence index was good at 128.2 and retail sales continued to grow at 15.4. Meanwhile, the prospect of increasing demand has become an incentive for the industry to increase production, as reflected in the Purchasing Manager Index (PMI), which has continued to record expansion at an increasingly strong level.

In the midst of global uncertainties, Indonesia’s external sector indicators were relatively good and under control, reflected in the current account which was still in surplus, the trade balance which remained a surplus for 26 consecutive months, foreign exchange reserves remained high as of October 2022 to finance 6.2 months of imports, and the ratio Debt was still at a safe level.

Business recovery was also increasingly visible with credit growth which continued to increase reaching 11.6% (YoY) as of December 2022 with the Non Performing Loan (NPL) level kept below 2.9%. Working Capital Loans increased as utility increased, as well as investment credit began to accelerate. In line with credit growth, the realization of People’s Business Credit (KUR) in December reached Rp356.3 trillion (95.5% of the 2022 target of Rp373.2 trillion) and was distributed to 8.2 million debtors. Meanwhile, the total outstanding as of December 31, 2022 was Rp516.3 trillion. In terms of welfare, poverty and unemployment rates have also decreased.

Taking into account economic developments up to 2022 and the prospects for the future which are still strong, the Government is optimistic that Indonesia’s overall economic target of 5.2% can be achieved. In order to realize the target of economic growth, the Government consistently implements various main strategies and policies to accelerate recovery and increase economic resilience.

These main strategies and policies include easing community mobility and preparing strategies for the transition of economic activity and community mobility from the pandemic era to the new-normal era, boosting people’s purchasing power for the bottom 40% group including through the National Economic Recovery Program (PEN) in the social protection cluster which is budgeted at Rp63.7 trillion.

Moreover, the Government is also preparing responsive steps to restrain rising food and energy prices by adding subsidies, the Pre-Employment Card Program is also continuously encouraged to increase the competence, productivity and competitiveness of the workforce. The government is also encouraging the development of Micro, Small and Medium Enterprises (MSMEs), including by increasing the KUR ceiling to Rp373.2 trillion in 2022 and making the Proudly Made in Indonesia (BBI) program successful, as well as continuing the National Strategic Project Program (PSN) for infrastructure development that can gives a large multiplier effect. These various policy steps and structural reforms will boost Indonesia’s economic growth thereby creating jobs for the wider community.

The government has continued to encourage the construction of a number of toll road projects to improve connectivity. 10 toll road sections with a length of 142 km have been inaugurated in operation since the beginning of 2022 including the section by the Company, namely the Manado-Bitung section of the Danowudu-Bitung section with a length of 13.4 km.

As of December 2022, the total operation of toll roads in Indonesia as a whole was recorded to have reached 2,578 kilometers, divided into 69 toll road sections and 47 toll road business entities (BUJT) in Java Island, Bali Island, Sumatra Island, Kalimantan Island, to Sulawesi Island.

All members of the Indonesian Toll Association (ATI) including the Company are committed to continue supporting the government in increasing connectivity through the development of toll roads.

In addition, the Company has also improved the performance of toll road operations by providing facilities and infrastructure in order to expedite the distribution of goods or services, as well as transportation services, especially during religious holidays.

Support was also carried out by implementing operation and preservation technology by digital transformation in order to improve the performance of traffic service transaction services and preservation.

Empowerment of MSMEs and growing investor interest to participate in the development of related businesses along the toll road corridors have also continuously been carried out. In the security sector, the Company has also sought to improve driving safety on toll roads through various initiatives and innovations by utilizing technological developments. In terms of service, the company ready to accelerate services once the traffic congestion began to arise.

Challenges and Obstacles Faced and Steps Taken to Resolve Them

External conditions that continue to improve and were conducive as previously described did not necessarily make the Company’s journey in 2022 smooth and without obstacles. A number of challenges were faced but the Company was able to overcome them well and recorded performance growth.

The Company’s challenges in running its business in 2022 include:

  1. Toll Road Concession Business Line
    To remain a market leader in the toll road industry, the Company needed to grow by obtaining concessions for new toll road sections. But on the other hand, in 2022, the Company had to brace the impact of the massive investment made. In order to keep its business and financial condition sustainable, it was necessary to carry out a consolidated assessment of the new toll roads taken. The company could then take on new toll road projects with a feasibility value that meets the requirements.
  2. Operational Business Line
    The government has pushed for the operation of the toll road to Multi Lane Free Flow (MLFF) with the issuance of Minister of Public Works and Public Housing Regulation (Permen PUPR) No. 16 of 2017 concerning Non-cash Transactions on Toll Roads with contactless-based technology in the form of toll payment transactions that are carried out without physical contact with toll transaction equipment.
    In response to this, the Company will implement MLFF on some sections in Nusa Dua - Ngurah Rai - Benoa. The company is also preparing an Automatic Vehicle Classification (AVC) to classify vehicle categories automatically. The implementation of this project is carried out through PT Jasamarga Tollroad Operator (JMTO) as a subsidiary company that focuses on toll road operations. In addition to toll road operations, the Company has PT Jasamarga Tollroad Maintenance (JMTM) as a subsidiary that is specifically assigned to provide consulting services for preservation programs.
  3. Prospective Business Line
    Intense competition in other business development fields has forced the Company to find ways to determine the competitive advantages to be built and focus on these lines. Other business developments built by the Company are related to the operation and preservation of technology-based toll roads and the management of Rest and Service Areas (TIP) in which their developments are used by the Company to secure toll road operations and increase revenue contribution on a consolidated basis.
  4. Financial Aspect
    The global economic recovery in 2021 was predicted to increase both global and Indonesian economic growth projections in 2022 in line with economic activities that are slowly returning to normal where these conditions have a positive effect on the potential of the Company’s toll revenues on a consolidated basis. However, this economic recovery has also affected the increase in the benchmark interest rate set by Bank Indonesia (BI), where by the end of 2022, the benchmark interest rate has reached 5.5%. This of course has a direct effect on the Company’s interest expense. Therefore, in the financial sector, the Company has focused on maintaining financial ratios to stay within the limits required by creditors, namely a minimum Interest Coverage Ratio (ICR) of 1.1x and a maximum Interest Bearing Debt to Total Equity (DER) of 5x. As a preventive measure, the Company sought to increase EBITDA performance growth. The Company has continued to carry out load efficiency while maintaining compliance with the MSS.
  5. Human Resources and General Affairs
    The speed of the Company’s business growth must be supported by the Company’s ability to provide the right human resources and have the ability according to the needs of the organization. In addition, the Company was faced with disproportionate demographics due to the large number of employees who are retiring in the next 5 years while there are still gaps in knowledge and experience with the younger generations of employees.
    In dealing with this, the Company has sought to continue increasing the capacity of its human resources through various programs such as training, coaching and mentoring. The company has also evaluated its business processes and adjusted its organizational structure. Furthermore, the fulfillment of human resources is also focused on the development of Operational and Prospective Line of Business Subsidiaries. Simultaneously, the Company has also carried out organizational rejuvenation to increase the speed of organizational adaptation and refreshment.

Analysis On Company Performance

The Company’s performance cannot be separated from economic conditions, both global and national. Improvement in the national economy has continued amidst global economic conditions that are still experiencing uncertainty. The company recorded a traffic transaction volume of 1,2 billion transactions in 2022, which was 4.6% higher than the plan or 53.9 million transactions. In terms of growth trends, the volume of transaction traffic shows an increase of 15.3% when compared to the realization in 2021. This was influenced by the declining trend in COVID-19 cases and increasing community mobility along with the reduction in the implementation of Community Activity Restrictions (PPKM) to level 1 in March 2022 until the end of 2022.

Until 2022, the Company has toll road concessions with a length of 1,906 km, of which 1,260 km have been operational. The Company added 13.4 km of operating toll road length in 2022, namely on the Manado-Bitung Section 2B on February 25, 2022.

The company was able to record non-construction operating revenues of Rp13,782.6 billion with contributions including from toll revenues of Rp12,443.9 billion and other operating revenues of Rp1,338.6 billion. In line with good control over operating expenses, especially related to supporting administrative activities that affect general and administrative expenses, the realized EBITDA performance was Rp8,680.0 billion or achieved above the plan of 8.2%. However, interest expense was realized 8.9%below the plan, this was influenced by the realization of lower interest rates due to efforts to reduce interest rates both in the parent company and its subsidiaries through the refinancing program.

Realization of the asset position in 2022 amounted to Rp91,139.2 billion, 10.7% lower or Rp10,878.4 billion from the plan of Rp102,017.6 billion in line with adjustments to the progress of the new toll road projects. Realized liabilities amounted to Rp65,517.8 billion or 12.9% lower than the plan of Rp75,213.2 billion and realized equity Rp25,621.4 billion or 4.4% higher than the plan of Rp26,804.4 billion.

Comparison of Targets And Realization

In general, the Company’s performance in 2022 succeeded in achieving the targets set in the 2022 RKAP. In the midst of the current uncertain political and economic conditions, the Company has continued to optimize the achievement of Key Performance Indicator (KPI) targets and maintain the Company’s soundness in 2022.

The Company’s Main Performance in 2022 was measured through 5 (five) perspectives, namely (i) Economic and Social Value for Indonesia – Financial, Operational and Social, (ii) Business Model Innovation, (iii) Technology Leadership, (iv) Increasing Investment and (v) Talent Development. KPIs were prepared by taking into account Shareholders’ Aspirations, as well as based on Minister of SOEs Regulation No. 11 of 2020 concerning Management Contracts and Annual Management Contracts for Directors of State-Owned Enterprises which are then adopted into internal regulations through Directors Decree No. 128/KPTS/2020 concerning Key Performance Indicators Board of Directors and the Annual Management Contract of the Board of Directors of PT Jasa Marga (Persero) Tbk. The total value of corporate KPIs in 2022 is 103.2% or 103,2% of the plan.

Business Prospects

President Joko Widodo (Jokowi) stated that many countries are overshadowed by the global recession and economic conditions will dim in 2023. Regarding the lower global outlook, Bank Indonesia (BI) has coordinated with the Government to measure global recession mitigation measures by Monetary policy that adopted the nature of portability. BI estimates that global economic growth in 2022 will be around 2.9%, but for 2023 it is predicted that it will probably only grow in the range of 2.7% - 2.8%. This prediction is reflected in the move by the US central bank or the Federal Reserve to announce that it will raise its main interest rate by 0.75 percentage points, lifting the target range to between 3% - 3.25%. This increase pushed the Fed’s interest rate to its highest level in almost 15 years amid US efforts to control price spikes in the country with the world’s largest economy. Therefore, based on the assessment and future predictions at the Bank Indonesia Board of Governors’ meeting on 21-22 December 2022 it was decided to increase the BI 7-Day Reverse Repo Rate by 25 bps to 5.5% in an effort to control domestic inflation.

In order to maintain domestic economic growth, BI will direct monetary policy to maintain economic stability, through 4 other instruments to support economic growth. One of them is that macroprudential policy will remain loose to support bank credit growth. Second, payment system digitization activities remain accommodative. Then two other policies namely financial market deepening and inclusive economic development will continue to encourage economic growth.

The Ministry of Public Works and Housing aims to continue building new toll roads throughout Indonesia with the targeted length of toll roads in 2024 around 4,000 kilometers. With government programs that continue to accelerate the construction of toll road projects, the Company’s future business prospects are still very promising. The Company has a competitive advantage as a toll road developer and operator with the highest total length of sections in Indonesia as well as good toll road operation and preservation capabilities. The company also has diversified its businesses to toll road operations, road preservation and other businesses that can support its performance growth going forward. Until the end of 2022, the Company has proven to have high resilience against tough challenges in the last three years from the impact of the pandemic that has occurred. This can be seen from its financial performance which continues to record improvement and growth, good funding capabilities, and high asset values. Overall, the Company is optimistic about its future business prospects and achieving performance growth according to the target.

In order to optimize its business portfolio, balance growth, and maintain sustainability, the Company carried out several corporate actions throughout 2022. In July 2022, the Company carried out a spin off (separation) of the Jasamarga Transjawa Tollroad Regional Division which consists of 4 main segments (Jakarta-Cikampek, Palimanan-Kanci, Semarang ABC, and Surabaya-Gempol), and transferred the Company’s share ownership of 9 Subsidiaries and Joint Ventures (PT JJC, PT JSB, PT TMJ, PT JSN, PT JNK, PT JGP, PT JPT, PT JSM, and PT JPM) to PT Jasamarga Transjawa Tol (PT JTT).

In addition, the Company has successfully carried out several corporate actions throughout year 2022, namely the acquisition of shares owned by PT Wijaya Karya (Persero) Tbk in the Subsidiary PT Jasamarga Kunciran Cengkareng (PT JKC) of 2.1% (June 29, 2022), the divestment of the Company’s shares in PT Ismawa Trimitra by 25% (September 14, 2022), and the divestment of the Company’s shares in PT Jasamarga Jalanlayang Cikampek by 40% (October 10, 2022).

The Company’s Future Strategies

In order to ensure sustainable growth and achieve the vision of Becoming the Largest, Trusted and Sustainable National Toll Road Company, Jasa Marga will continue the company transformation that has been stipulated in the Company’s Long-term Plan (RJPP) for 2021–2025. Where this RJPP descends into the Company’s Work Plan and Budget (RKAP), which in 2023 takes the theme “Adaptive and Innovative Overcoming Challenges to Realize Sustainable Toll Roads”. In 2023 there will be strategy execution that focuses on six strategic programs, namely:

  1. Implementation of fundamental fixes through the active development of traffic projections, budgets, and project and financial controls in Data-Based Toll Road Concession Subsidiaries, formalization of unit cost standardization and common services as well as operations and maintenance, development of IT, Legal and Procurement joint services for the Jasa Marga Group.
  2. Implementation of core business expansion through integration of toll road operations, institutionalization of integrated project selection and planning of the entire business portfolio, transformation of laborbased and volume-based JMTO business models to technology-based, transformation of workforcebased and project-based JMTO business models to technology-based.
  3. Implementation of related business by redefining the focus of PT JMRB’s business portfolio and business model.
  4. Implementation of financing and asset recycling through establishing a portfolio management framework and supporting corporate actions, coordinating with internal parties regarding equity financing for the Trans Java Toll Road, and seeking and implementing Asset Recycling.
  5. Implementation of organizational human resources and capabilities through optimizing the strategic role of the Jasa Marga business group by improving business processes and interaction models, implementing human capital architecture, structuring JMTO human capital due to disruptive technology, implementing crash training programs, increasing employee entrepreneurial skills due to disruptive technology, internalizing and measurement of AKHLAK culture, measurement of AKHLAK culture with the ACHI method, as well as the development and determination of analytical data capabilities.
  6. Implementation of technology through developing business plans and consolidation platforms, developing integrated IT master plans and defining the division of roles for IT/Technology functions, digitizing financial transactions, using ETC technology and supporting the implementation of MLFF, social media ranger, implementation of WIM, implementation of priority maintenance based on artificial intelligence, MIDAS for traffic services, implementing artificial intelligence-based traffic monitoring for traffic engineering, developing the Travoy application through the implementation of geofencing, developing JM Click as an integrated technology, and implementing internal process automation.

The Board of Directors’ Role in Strategy and Strategic Policies Formulation

The Board of Directors as top management has a key role in formulating the Company’s strategy and strategic policies. The corporate strategy and strategic policies are outlined in the RJPP document.

The strategy formulation activity begins with brainstorming between the Board of Directors and the Board of Commissioners through a visioning workshop to determine the direction of the Company’s Vision and Mission. Taking into account the results of the Company’s external and internal analysis, the Board of Directors would then compile the Company’s strategic directions outlined into several major themes in order to achieve the Company’s Vision and Mission. Strategic directions are developed by the Board of Directors for each of the Company’s business lines so that each business line receives clear direction as a business group of the Company.

In addition, the Board of Directors will then formulate strategic policies as provisions or rules of the Company in carrying out its business activities. The strategic policies are prepared and perfected by the Board of Directors by involving related units through holding limited meetings.

The results of the preparation of the Company’s strategy and strategic policies will be submitted by the Board of Directors to the Board of Commissioners through approval in the RJPP.

Process Conducted by the Board of Directors to Ensure Implementation of Strategy

In order to ensure that implementation of the Company’s strategy is in line with its strategic directions, every year the Company prepares a work program in the RKAP referring to the approved RJPP. However, the Company’s performance target in the RKAP also takes into account the shareholder’s aspiration letter issued by the Ministry of SOEs as the majority shareholder of the Company.

The work program is prepared by all business lines of the Company by taking into account the targets for achieving operational, development, financial and human resource goals. All work programs to be implemented will be selected based on a cost-benefit analysis and need to obtain approval from the Board of Directors.

In addition to monitoring the implementation of strategy, the Board of Directors also carries out periodic monitoring activities to evaluate the achievement of the Company’s performance in terms of: (i) Economic and Social Value for Indonesia - Financial, Operational and Social, (ii) Business Model Innovation, (iii) Leadership Technology, (iv) Increasing Investment, and (v) Talent Development.

Corporate Governance Implementation

The implementation of GCG principles can contribute to improving the Company’s performance. These principles include transparency, accountability, responsibility, independence, and fairness implemented in the Company’s business environment. These five principles are implemented through a commitment to the implementation of good corporate governance in a sustainable manner, fulfilling the interests of Shareholders, the duties and responsibilities of the Board of Commissioners and Directors as well as disclosure of information and transparency. Jasa Marga realizes the importance of implementing GCG principles as a way to increase the trust of Shareholders and Stakeholders. Apart from having to comply with applicable laws and regulations, Jasa Marga’s management must also uphold the norms of behavior and ethical values in doing business to enhance the reputation and image of the Company. For this reason, the Company already has Good Corporate Governance Guidelines and a Code of Conduct. The Code of Conduct is a guide containing principles governing behavior in implementing company values. This Code of Conduct is expected to become the aspirations of Jasa Marga Individuals to achieve Jasa Marga’s vision and mission.

To assess the effectiveness and measure the level of implementation of GCG practices in the scope of business, the Company annually conducts a GCG assessment. In 2022, the GCG assessment was carried out by an Independent Consultant, namely PT Sinergi Daya Prima using the assessment criteria based on the Decree of the Secretary of the Ministry of State-Owned Enterprises No. SK-16/S.MBU/2012 dated June 6, 2012 concerning Indicators/Parameters for Assessment and Evaluation of the Implementation of Good Corporate Governance in SOEs, the score obtained by Jasa Marga was 98.42 or with the title “Very Good”. This achievement was higher than the results of the previous year’s assessment, where the Company achieved a score of 98.20 with the title “Very Good”.

Assessment of the Performance of the Committees under the Board of Directors and Its Basis of Assessment

In 2022, the Board of Directors considers that all Committees under the Board of Directors have carried out their duties optimally. The assessment is carried out with the criteria of performance results in the form of each committee’s contribution to the Company, including reports and recommendations given to the Board of Directors.

In supporting the effectiveness and efficiency of carrying out the duties and responsibilities of managing the Company, the Board of Directors of Jasa Marga is assisted by two Committees which are under and directly responsible to the Board of Directors, namely the Risk Management Committee and the Information Technology Steering Committee.

Changes in the Board of Directors Composition

In 2022, there was no change in the composition of the Company’s Board of Directors. However, from the time fiscal year 2022 ended to the date of writing of this report, changes were made in the composition of the Board of Directors, based on the Extraordinary General Meeting of Shareholders (GMS) on February 08, 2023, to improve the roles, functions, and performance of duties of the Company’s Board of Directors. The Shareholders unanimously confirmed the dismissal of Mr. Ade Wahyu as Director of Finance and Risk Management and appointed Mrs. Pramitha Wulanjani as Director of Finance and Risk Management. On behalf of the Company, the Board of Directors would like to thank Mr. Ade Wahyu for his contribution and dedication while serving as a member of the Company’s Board of Directors. Accordingly, the composition of the Company’s Board of Directors as of the date of writing of this report is as follows:

Position Name
President Director Subakti Syukur
Director of Business Reza Febriano
Director of Human Capital and Transformation Bagus Cahya Arinta B.
Director of Operations Fitri Wiyanti
Director of Business Development Mohamad Agus Setiawan
Director of Finance and Risk Management Pramitha Wulanjani

Appreciation

The Board of Directors gives the highest appreciation to all Jasa Marga employees who have worked hard in the midst of challenging economic conditions. The Board of Directors expresses their gratitude for Jasa Marga was able to achieve good performance in 2022.

To the Board of Commissioners, all members of the Board of Directors would like to express their gratitude for the supervision and advice and directions given, so that the management of the Company can be carried out properly and produce performance as expected. To all partners and other stakeholders, we thank you for the cooperation that has been very well established.

Jakarta, 18 April 2023

On Behalf of the Board of Directors


Subakti Syukur

President Director