Jasa Marga is still the Leader in the toll road industry in Indonesia. As of 2018, the length of toll roads in operation managed by Jasa Marga is approximately 1000 km or 66% of the total length of toll roads operating in Indonesia.

The honorable shareholders and stakeholders,

We would like to deliver The Directors’ report on the results of the management of the Company throughout 2018. The Directors have given their best by generating performance in accordance with the expectations of shareholders. As a market leader in the toll road industry, during 2018, the Company continued to improve to the operation of new toll roads. In the Operational sector, the Company continued to improve the performance of toll road operation services and other business development, through increasing the capabilities of Subsidiaries and Other Businesses.

Within this report, we would like to present an analysis of the Company’s performance and the Company’s business prospects in the future. Let us also convey the development of the implementation of corporate governance and changes in the composition of the Directors throughout 2018.

Company’s Performance Analysis

The Company’s performance is strongly influenced by external and internal factors. Economic condition was one of the external factors that directly affected the Company’s business activities. Therefore, in this section we would like to describe economic analysis that has an impact on the Company’s performance.

Economic Analysis

2018 is a challenging year. We found out that at least there were 3 (three) important things that needed to be observed. First, world economic growth in 2018 was estimated to reach 3.73% higher than 2017 which reached 3.70% and was likely to slash back to 3.70% in 2019. Secondly, the increase of US central bank interest rate, the Fed, would be followed by normalization of monetary policy in Europe and a number of other developed countries. Rising inflationary pressures and increasingly strong economic activity had led to increasingly US monetary policy stance. After raising the Fed-Fund Rate (FFR) as many as 4 (four) times by 100 basis points this year, the US Fed would likely raise interest rates again 3 (three) times by 75 basis points in 2019. Third, uncertainty in Global financial markets drove high investment risk premiums to Emerging Markets countries. These three global developments influenced the strength of the US dollar and the reversal of foreign capital from Emerging Markets, including Indonesia.

In the midst of this unfavorable global economic development, the Government, Bank Indonesia, the Financial Services Authority, and other various authorities have developed strong policy synergies in the national economic policy combination. This caused Indonesia’s economic performance in 2018 to be quite good with sustained stability and continued growth momentum. The support and optimism of banks, the business world, and investors were also getting stronger. Indonesia’s economic growth in 2018 reached 5.17%, higher than 2017 which reached 5.07%. Inflation throughout 2018 remained low, and consequently it supported an increase in people’s purchasing power. Maintained financial system stability was supported by strong banking capital, controlled credit risk, increased lending, and adequate liquidity. The domestic economy which remained good was supported by the well maintained payment system, both in cash and non-cash.

Well maintained economic stability encouraged the toll road industry to continue to grow in 2018. Industrial, operation and maintenance of toll roads continued to grow in accordance with those targeted by the Ministry of Public Works and Public Housing. In line with the increasing length of the toll road, the number and business model of Rest and Services also grew in 2018 and is expected to continue to grow in the future.

Company Performance

The toll road industry that grew well in 2018 has been well captured by the Company. This can be seen with significant performance growth during 2018.

In 2018 Jasa Marga expanded the business by operating 7 (seven) new toll roads along the 318.75 Km successfully operated. Hence, by the end of 2018 Jasa Marga had managed to operate a total of 1,000 Km of toll roads. The seven new toll roads operating in 2018 are namely:

  1. Medan-Kualanamu-Tebing Tinggi Segment of Simpang Susun (SS) Tanjung Morawa-SS Parbarakan as long as 10.75 km.
  2. Bogor Ring Road of Kedung Badak Segment-Yasmin intersection as long as 2.65 km.
  3. Batang-Semarang as long as 75.00 km.
  4. Semarang-Solo of Salatiga-Kartasura Segment as long as 32.65 km.
  5. Solo-Ngawi as long as 90.43 km.
  6. Ngawi-Kertosono-Kediri of Ngawi-Kertosono Segment as long as 87.02 km.
  7. Gempol-Pasuruan of Rembang-Pasuruan (Grati) segment as long as 20.25 km.

Along with the operation of the new toll road, Jasa Marga also contributed to the achievement of the massive toll road business in 2018, namely the connection of the Trans Java Toll Road from Merak to Pasuruan (Grati). Of the total 933 Km of Trans Java Toll Roads that have been operating, Jasa Marga operates 583 km or 63% of the total length of the current Trans Java Toll Road.

The positive achievement of development performance has succeeded in increasing financial performance in 2018, Jasa Marga managed to record a net profit of IDR 2.20 trillion, remained stable amid the expansion of the toll road business. This was also supported by the success of the Company in maintaining EBITDA growth which in 2018 reached a value of IDR 6.02 trillion or grew by 10% from 2017, while the EBITDA Margin was 61.56%.

It is Jasa Marga’s achievement to maintain positive performance. In terms of operating income outside of construction, it was recorded at IDR9.78 trillion, growing by 9.67% from 2017, with contributions from toll revenues valued at IDR9.04 trillion, rising up 9.12% from 2017 and other operating revenues of IDR748.12 billion , growing up 16.82% from 2017.

Toll revenue growth continued to grow in accordance with the trend of growth in traffic volume on a consolidated basis. In addition, the new toll road sections operated from 2016 to 2018 have also contributed to toll revenues.

On the other hand, the new toll road segments contributed to the growth of assets from the Toll Road Concession Right which reached IDR6.29 trillion or increased by 11.24% from 2017, so Jasa Marga’s Total Assets in 2018 were recorded at IDR82.42 trillion.

To provide the best service for road users, Jasa Marga continued to innovate in the field of transaction services. Throughout 2018, Jasa Marga introduced innovations in transaction services in the form of transaction system integration carried out at Semarang Toll Road Section A, B, C and Semarang-Solo Toll Road (eliminating the transaction point at GT Tembalang) and integration with Semarang-Batang Toll Road (eliminating the transaction point at GT Manyaran), as well as the integration of the JORR Toll Road (SS Penjaringan - Pondok Aren - Kebon Bawang) with the first stage of integration carried out on Prof. Dr. Ir. Soedijatmo and JORR W1 Toll Road (omitting the transaction points in the GT Kayu Besar on the Main Line) then proceed with the next stage, namely the integration of JORR W1, JORR W2U, JORR W2S, JORR S, JORR E1, JORR E2, JORR E3, Tanjung Priok Access (ATP) and Pondok Aren-Ulujami Toll Road (eliminating transaction points in GT Meruya Utama and GT Rorotan and GT Pondok Ranji Sayap Arah Bintaro).

Obstacles and Solutions

From the external side, land acquisition is still the main obstacle in the completion of toll road construction. However, with the implementation of Law No. 2 of 2012, certainty in terms of both time and price has accelerated the land acquisition process.

This led to an increase in the progress of land acquisition so that Jasa Marga continued to actively carry out funding innovations to support the Company’s expansion needs. In 2017, Jasa Marga has issued Securitization Assets for Toll Revenues, Project Bonds and Komodo Bonds. In 2018, Jasa Marga innovates alternative funding by issuing Limited Participation Mutual Funds (RDPT).

From the internal side, Jasa Marga does not face significant obstacles. However, from the internal side, Jasa Marga is still experiencing problems related to the management of human resources related to the implementation of regeneration and regeneration that require acceleration and synergy and utilization of technologies that are not optimal. This has been overcome by making changes to the competency development strategy that prioritizes the Company’s core competencies. Based on that background, the approach used in competency development was carried out through 6 (six) academies, namely: 1) Project Development, 2) Advanced Technology, 3) Business Leadership, 4) Succession Plans, 5) Scholarship Programs, and 6) Independent Programs equivalent to training. During 2018, the total competency development using the academic approach has been carried out for 22,931 days and attended by 9,120 participants. A total of 418 competency development programs were carried out. These activities have been carried out effectively and are expected to accelerate the better regeneration and mastery of technology.

Analysis of Business Prospects

The Indonesian economy which continues to show good growth is one of the fundamental factors for the Government to realize connectivity in strengthening national community. One of the efforts to strengthen national connectivity was the addition of the toll road network which became one of the programs for the 2015-2019 National Medium Term Development Plan. One of the plan targets was to increase the length of the toll road to operate for 1,000 km.

Until now, Jasa Marga is still the Leader in the toll road industry in Indonesia. As of 2018, the length of toll roads in operation managed by Jasa Marga was approximately 1000 km or 66% of the total length of toll roads operating in Indonesia. The numbers of vehicles passing through the toll road were around 80% (1.4 billion) through the toll roads operated by the Company.

The enactment of the 2015-2019 National Medium term Development Plan and the position of the Company in the toll road industry in Indonesia show that the Company’s business prospects in the future will be very good. Other than increasing toll road development, there were several other factors that made the prospect of the toll road industry developed by the Company more attractive. These factors include:

  1. The traffic volume on the toll road managed by the Company is expected to continue to grow positively, thus it is guaranteeing sustainable income growth.
  2. The length of the concession period with the nearest time will expire in 2044 for the 13 (thirteen) segments currently being operated by the Company.
  3. New toll roads connected to existing toll roads, so there is a potential for increased traffic volume.
  4. There was the potential for additional toll road concessions through a plan to take over the toll roads of other investors who stopped the investment process (acquisition).
  5. Rapid population development.
  6. Development of the property industry.
  7. Growth in sales of four-wheeled vehicles became the largest markets of toll road users.

The Company believes that these opportunities are the driving factors for the Company’s good prospects. For this reason, the Company plans to continue to selectively develop segments throughout Indonesia.

Development of Application of Corporate Governance

The success of managing a company was strongly influenced by the quality of the implementation of good corporate governance (GCG). The Company consistently applies the principles of GCG, namely transparency, accountability, responsibility, independence and fairness. In applying the principle of transparency, the Company always guarantees the disclosure of material and relevant information regarding performance, financial conditions and other information in a clear, adequate, accurate, comparable and timely manner and is easily accessible to stakeholders according to their rights. This principle of openness does not reduce the obligation to protect confidential information regarding the Company and its Customers and Working Partners in accordance with the applicable laws and regulations.

The application of the principle of accountability has been implemented by ensuring the clarity of the functions, rights, obligations, authorities and responsibilities of the Company that enable the management of the Company to be carried out effectively. Accountability refers to the obligations of a person or a work organ of the Company relating to the implementation of the authority and/ or the implementation of responsibilities imposed by the Company on it. Responsibility and timeliness can be measured for each activity and provide a satisfaction service for Toll Road Service Users.

The principle of responsibility was implemented by ensuring conformity in carrying out its business activities based on sound corporate principles, fulfilling obligations to the Government in accordance with applicable regulations, cooperating actively for mutual benefits and striving to be able to make a real contribution to society.

In applying the principle of independence, the Company has guaranteed professional management of the Company without conflicts of interest and influence / pressure from any party that is not in accordance with applicable laws and regulations and sound corporate principles. Whereas the principle of fairness has been applied by guaranteeing fair and equal treatment in fulfilling the rights of stakeholders according to the applicable rules and regulations.

In order to improve the quality of GCG implementation, the Company always assesses the implementation of GCG. GCG assessment can be used as a basis for management actions so that the implementation of GCG can be carried out effectively. Assessment becomes part of the check and balances mechanism. With the assessment, the achievement of activities can be known certainly, and further actions to improve the performance of an activity can be determined.

GCG assessment was carried out using the evaluation parameters of the Ministry of State-owned Enterprises, namely SK-16 / S. MBU / 2012 dated June 6, 2012 concerning Indicators / Parameters for Evaluating and Evaluating on the Implementation of Good Corporate Governance in State-Owned Enterprises. The assessment has been carried out by an independent party, so the quality of the assessment is expected to be better.

The assessment results conducted in 2019 for the 2018 financial year showed that the score achieved was 97.82%, which means that the implementation of GCG in the Company was in Very Good condition, increased from the previous year which amounted to 97.17%. Based on the results of the assessment, the Company has followed up on the results of the assessment recommendations which include:

  1. Review of the Standard Operating Procedure (SOP) according to the needs of the Company
  2. Improving the quality of the Annual Report.
  3. Implementing Issuer’s Compliance Knowledge Sharing in accordance with the Capital Market Regulations in Marga Lingkar Jakarta as a Subsidiary that becomes an Issuer.
  4. Changing the Management Consultant and Addition of Whistleblowing System Reporting Channels (Email, Website, SMS, Whatsapp and PO BOX).
  5. Conducting Socialization of Corruption Eradication in collaboration with the Corruption Eradication Commission.
  6. Disseminating new guidelines, policies and regulations.

Assessment of The Committee Under The Directors Performance and Its Basis of Assessment

The Risk Management Committee is a committee formed to assist the Directors in Establishing the context of strategic risk, Establishing policies and manuals for Risk Management Systems, Establishing strategic risk criteria and determining the results of measurement of risk management implementation maturity within Jasa Marga Group. During 2018, the Risk Management Committee carried out its duties well through meetings by discussing the evaluation of the Company’s risk management policies, reviewing the risks faced by the Company and conducting risk assessments.

The Information Technology Steering Committee is a committee formed to assist the Directors in determining Aligning IT and Business Strategies, master plans, IT governance and optimizing IT resources. During 2018, the Information Technology Steering Committee carried out its duties well through meetings by discussing the Strategic Alignment, IT Management in accordance with the Master Plan and IT Governance and Supervision of IT processes and performance (Performance Measurement) periodically. Kelola TI dan Pengawasan terhadap proses dan kinerja TI (Performance Measurement) secara periodik.

Changes in Member Composition of The Directors

In the 2018 period, the composition of the Company’s Directors underwent several changes as explained below:

Number and Composition of The Company’s Directors Before Annual GMS on April 10th, 2018

The number and composition of the Directors prior to the Annual GMS on April 10, 2018, namely 6 (six) Directors consisting of 1 (one) Managing Director, and 5 (five) Directors.

Desi Arryani : President Director
Mohammad Sofyan : Director of Operations I
Subakti Syukur : Director of Operations II
Hasanudin : Development Director
Donny Arsal : Finance Director
Kushartanto Koeswiranto : Human Resources and General Director/Independent Director

Number and Composition of The Directors After Annual GMS on April 10th, 2018

The number and composition of the Directors after the Annual General Meeting of Shareholders on April 10, 2018, consist of totaling 6 (six) Directors people covering of 1 (one) Managing Director, 1 (one) Director/ Independent Director and 4 (four) Directors.

Desi Arryani : President Director
Mohammad Sofyan : Director of Operations I
Subakti Syukur : Director of Operations II
Adrian Priohutomo : Development Director
Donny Arsal : Finance Director
Kushartanto Koeswiranto : Human Resources and General Director/Independent Director

Number and Composition of The Directors After The Extraordinary GMS on September 5th, 2018

The number and composition of the Directors after the Extraordinary GMS on September 5, 2018, consist of the totaling 6 (six) Directors people covering 1 (one) President Director, and 5 (five) Directors.

Desi Arryani : President Director
Mohammad Sofyan : Director of Operations I
Subakti Syukur : Director of Operations II
Adrian Priohutomo : Development Director
Donny Arsal : Finance Director
Alex Denni : Human Resources and General Director/Independent Director

Changes in the composition of the Directors were carried out by taking into account the Company’s vision, mission and strategic plans to enable effective, appropriate and fast decision making, and the company can act independently.

Closing

This is the report of the Company’s management and performance during 2018. The Directors gives the highest appreciation to all parties who have supported and provided their best contribution, especially to all employees of the Company, so the Company can produce very good performance according to the expectations of shareholders. To all employees of the Company, the Directors gives the highest appreciation for the dedication that has been given.

To the Board of Commissioners, the Directors would like to thank you for the direction given, so the Company’s business activities can run effectively. For shareholders’ trust, the Directors would like to thank and will continue to strive to improve the Company’s value in a sustainable manner. To the work partners and stakeholders, the Directors would like to thank for the cooperation and support provided.

The Directors are committed to maintaining the Company’s position as the leader of the toll road industry and takes an important role in supporting Government programs to realize Indonesian connectivity.

Jakarta, February 2019

On behalf of the Directors


Desi Arryani

President Director