Report of the Board of Commissioners

Throughout 2021, the Board of Commissioners has carried out the function of supervising and advising to the Board of Directors, in line with strengthening the working relationship between the two organs. Moreover, the Board of Commissioners through a number of supporting committees has also carried out a monitoring and evaluation process, including the audit process and risk management in 2021, as well as carrying out comprehensive monitoring of the Company’s compliance aspects and the implementation of GCG in accordance with applicable regulations and laws.

On this occasion, the Board of Commissioners would like to submit a report on the implementation of supervision and advisory on the management of the Company in 2021. This report includes a description of the performance assessment of the Board of Directors, supervision of the implementation of the Company’s policies and strategies, to the frequency and mechanism for providing advice to the Board of Directors.

Then, still referring to the same data, world trade growth was estimated to be realized at 9.3%, or far above the 2020 realization at minus 8.2%. In this estimation, the realization of growth was higher in the group of developing economic countries with growth reaching 11.1% compared to the group of developed economies with a realization of growth at 8.3%. In this situation, there is an improvement in the level of global commodity prices, with commodity prices of oil and gas were estimated to grow to 67.3% after the previous year at minus 32.7%, and non-oil and gas commodity prices which were estimated at 26.7% compared to the realization in 2020 at 6.7%.

ASEAN countries, as part of the group of developing countries, are known to experience a similar trend of recovery although with a limited level of improvement, which is estimated to grow by 3.1% compared to the realization in 2020 which was minus 3.4%. In this situation, Indonesia as part of the ASEAN region was estimated to be able to realize an economic growth rate of up to 3.7%, or better than the realization in 2020 at minus 2.1%, as referred to in the Global Economic Prospects document released by the World Bank in January 2022. There are a number of aspects that encourage the improvement situation, especially in Indonesia, including the realization of a vaccination program that supports the restoration of human mobility to the continuation of the National Economic Recovery (PEN) program by the Government.

Referring to the information released by the Ministry of Finance in January 2022, the trend of Indonesia’s economic recovery in 2021 can be measured through a number of indicators, including the Consumer Confidence Index (IKK) which increased to a level of 118.5 and the level of electricity consumption for industries and businesses which respectively grew by 14.5% and 5.7% as of November 2021. In addition, there was an increase in the inflation rate of 1.87% (year-on-year/yoy) indicating an improvement in the level of domestic demand and consumption, with maintained levels in line with implementation of fiscal, monetary, and real sector policies by the central and regional governments. Through a number of these improvements, still referring to information from the Ministry of Finance, the realization of state revenues was recorded at Rp2,003.1 trillion or reaching 114.9% compared to the target set in the 2021 State Budget.

In the midst of this situation, Indonesia’s infrastructure industry is known to experience a recovery marked by an increase in the infrastructure budget compared to the previous year’s budget which reached 77.1%, from Rp281.1 trillion in 2020 to Rp417.4 trillion in 2021. Referring to the document published by the Ministry of Public Works and Public Housing (PUPR), as of the end of 2021, the number of toll roads that have been operating in Indonesia has reached 61 sections with a total length of 2,378 km. This figure also shows an increase of 278 km, equivalent to 13.24% compared to the number of the existing toll roads at the beginning of 2020. In general, there are a number of factors that affect the recovery situation of the infrastructure industry in 2021, including an increase in the realization of Government spending which reached 9.2% compared to the realization in the previous year, which included allocations to financing the infrastructure sector.

The Board of Commissioners assesses that the Board of Directors has carried out the management of the Company with prudence and a sense of responsibility, in accordance with the work plan and established policies. This was concluded based on a number of compliance indicators, according to the targets contained in the 2021 Company Work Plan and Budget (RKAP), which generally showed positive results. In addition, in compiling a performance appraisal, the Board of Commissioners also pays attention to and considers the results of the assessment of the Board of Directors based on Key Performance Indicators (KPI), which has been implemented in accordance with the Regulation of the Minister of SOEs No. PER-11/MBU/11/2020 dated November 23, 2020. Further explanation regarding the assessment of the performance of the Board of Directors for 2021 is as follows.

Basically, the Board of Commissioners assessed the management of the Company by the Board of Directors for 2021 through a number of performance achievements, both in the operational and financial sectors. In the operational sector, the Company’s performance achievements were marked by the acquisition of 24 projects out of a total of 117 project tenders participated, with a total value of Rp53.06 trillion. Of the 25 project tenders won, the Company managed to record a new project value of Rp15.48 trillion. For this matter, the Company’s competitiveness for 2021 is 29.19%. Meanwhile, in the financial sector, the Company’s performance achievements are marked by the acquisition of revenue in 2021 which amounted to Rp12.11 trillion, or a decrease compared to the previous year at Rp16.19 trillion. With the realization of the cost of revenue at Rp10.33 trillion, the Company was able to record a gross profit for 2021 at Rp1.90 trillion.

The Board of Commissioners assessed that the Board of Directors and related ranks were able to carry out a number of efforts to develop the Company’s capacity throughout 2021, especially by obtaining work contracts in 3 (three) business models, namely self-managed work contracts, Joint Operations (KSO), and investment. In addition, the Company has also succeeded in implementing changes to the organizational structure, according to the provisions in the Decree of the Board of Directors No. 16/SK/WK/2021 dated June 29, 2021. Through changes in the pattern of business/business units carried out, as of December 31, 2021, the Company’s business units consist of 5 (five) divisions, namely Building Division, Infrastructure I Division, Infrastructure II Division, EPC Division, and the Overseas Division.

The Board of Commissioners expresses its appreciation to the Board of Directors and all relevant ranks for a number of management achievements, as evidenced by obtaining awards and certifications throughout 2021. A number of awards and certifications obtained in 2021 include the Covid-19 Prevention and Control award in the workplace, the award for the HIV-AIDS Prevention and Control Program in the workplace, as well as the zero accident award by the Ministry of Manpower of the Republic of Indonesia; in addition to the award in the field of Construction Safety Management System (SMKK) by the Ministry of Public Works and Public Housing.

The Board of Commissioners understands that the economic and industrial situation in the coming year will still present risk factors that will have an impact on the Company’s business activities and operations. To that end, the Board of Commissioners will carry out a number of necessary steps to strengthen the supervisory function and provide advice, along with increasing the effectiveness of the working relationship with the Board of Directors, in order to encourage the strengthening of the Company’s competitiveness going forward. The Board of Commissioners will support the improvement of the risk management system in dealing with business dynamics, as well as support the Company’s focus on a number of management aspects including efficiency strategies and future business development. The Board of Commissioners is optimistic that the Board of Directors and all related ranks will be able to carry out their management duties in an optimal manner in 2022, according to the targets and work plans that have been set.

Throughout 2021, the Board of Commissioners has proactively carried out a monitoring process on the implementation of the Company’s policies and strategies by the Board of Directors, both in operational management and financial management. The results of the monitoring process carried out as a whole have been delivered in the form of suggestions and recommendations as the implementation of the advisory function, which is carried out through joint meetings and coordination meetings which are held regularly. The joint meetings and coordination meetings have also included discussions on certain aspects that require special attention, including those related to the development of the industrial situation and other external matters that have an impact on the Company. Moreover, the Board of Commissioners has also carried out an agenda to carry out direct supervision on project locations through working visits.

The Board of Commissioners has carried out a supervisory role through the proportional exercise of authority, including a review of the implementation of the 2021 RKAP to the preparation of the 2022 RKAP, as well as periodic reports prepared by the Board of Directors. Meanwhile, the implementation of this supervisory role is carried out more specifically through the committees under the Board of Commissioners, which throughout 2021 have provided the necessary support effectively.

The Board of Commissioners assesses that the Board of Directors and all relevant ranks have implemented the 2021 policies and strategies effectively, in accordance with the work plan and budget that has been prepared. Furthermore, the policies and strategies that have been formulated and implemented as a whole have been able to respond to a number of existing opportunities and are adaptive to the challenges faced. Moreover, the Board of Commissioners considers that the implementation of policies and strategies has been carried out by taking into account the recommendations and suggestions provided by the Board of Commissioners, in accordance with the implementation of the function of providing advice through the working relationship between the two organs.

In addition, the Board of Commissioners has also given serious attention to the implementation of GCG for 2021, in line with monitoring the Company’s compliance aspects with applicable regulations and laws. Through the focus of supervision and implementation of GCG in 2021, the Board of Commissioners assesses that the Board of Directors and related ranks have carried out the management of the Company in accordance with the achievement of the vision and mission as well as strategic directions from the Shareholders.

The Board of Commissioners ensures that the advisory function can always be carried out with prudence and responsibility, and is directed at measurable and realistic recommendations. Technically, the function of providing advice is carried out in 2 (two) levels. First, Performance Level, which is the level of implementation of providing direction and guidance to the Board of Directors through the implementation of working relationships. Second, the Conformance Level, which is the level of monitoring the follow-up by the Board of Directors on the advice that has been submitted, in order to ensure whether there is obstacle encountered and the effectiveness of follow-up on the management being carried out.

The Board of Commissioners periodically holds joint meetings with the Board of Directors as a forum for delivering advice. In the meeting forum, the Board of Commissioners has the authority to request information from the Board of Directors, including related to the development of the Company’s performance as well as a number of obstacles that may be faced. Based on this information, the Board of Commissioners can then submit suggestions and recommendations regarding matters that need to be carried out by the Board of Directors. Throughout 2021, the Board of Commissioners and Board of Directors held … joint meetings, each of which has been documented in the form of minutes of meetings.

In addition to holding joint meetings, the implementation of the advisory function is carried out through communication based on the results of the working visit of the Board of Commissioners at the Company’s project locations. The working visit was carried out, among others, as an effort to supervise the implementation of policies to the implementation of health protocols in the operational environment.

Throughout 2021, the Board of Commissioners has made 6 (six) working visits to the project site with the following details:

In general, global and national economic conditions for 2022 are expected to experience positive growth, with growth rates below the estimated figures for 2021. This can be concluded, among other things, through data contained in the Global Economic Prospects document released by the World Bank in January 2022. Referring to the document, world economic growth for 2022 is estimated to be realized at 4.1% or below the 2021 estimated figure of 5.5%. Furthermore, the realization of growth is expected to be higher in the developing country group, with a growth of 4.6%, compared to the developed economy group with an estimated growth of 3.8%. Still referring to the same document, there is an estimate of a decline in world trade volume in 2022, with a projected growth realization at 5.8%, compared to the estimated realization in 2021 which reached 9.5%. In this situation, world commodity prices are expected to experience limited growth in the oil and gas commodity group, namely by 7.2%, as well as a decline in the growth rate of non-oil and gas commodities, with an estimated realization at minus 2.0%.

There are a number of factors that are expected to have an influence on the realization of economic growth in 2022, including the emergence of the Omicron variant at the beginning of the year which prompted a number of countries to re-implement regional quarantine policies (lockdown) as well as the disparity in the level of vaccination program coverage between developed and developing countries. The factors that are expected to have an influence, the Board of Commissioners assesses, have the possibility to present similar obstacles to the national economic situation, although there is still optimism in line with the acceleration of the vaccination program in Indonesia that is running well and the development of the Government’s response in facing the next pandemic wave after the arrival of the Omicron variant.

In the middle of a number of assumptions described above, Indonesia’s economic growth is expected to be able to continue the recovery trend that has occurred during 2021. In general, referring to information published by the Ministry of Finance of the Republic of Indonesia, Indonesia is estimated to be able to realize a growth rate of 5.6% based on the assumption of economic growth in the ASEAN region in the January 2022 edition of the World Economic Outlook document released by the International Monetary Fund (IMF). Furthermore, the Ministry of Finance projects the growth rate in a close range, namely at 5.2% according to the Basic Macroeconomic Assumptions in the 2022 State Budget (APBN). As additional information, optimism in the forecast of Indonesia’s economic situation in 2022 is fundamentally supported by the continuation of the implementation of the National Economic Recovery (PEN) program by the Government as well as the policy focus on manpower creation to improving the quality of community welfare.

Moreover, referring to the 2022 State Budget Information document released by the Ministry of Finance of the Republic of Indonesia, budget support for infrastructure development for 2022 is Rp365.8 trillion, which will specifically be utilized in development priority policies with strategic outputs that encourage economic recovery. Furthermore, the utilization of the infrastructure budget in 2022 will be directed towards the following policies:

Taking into account a number of the descriptions above, the Board of Commissioners considers that the Company has good business prospects for 2022. There is a relatively large opportunity for the Company to be utilized as a positive contribution to the long-term national economic recovery, particularly through infrastructure policies that run by the government. The Board of Commissioners believes that the Board of Directors and related ranks have a comprehensive understanding of the important role of infrastructure development in the Government’s overall efforts to improve the quality of the flow of goods and services as well as connectivity between regions of Indonesia. Therefore, the Board of Commissioners is optimistic that the Company will be able to take the necessary steps to maximize performance in 2022, including as a form of involvement in infrastructure development policies.

Furthermore, there are a number of directions and recommendations prepared by the Board of Commissioners regarding the Company’s strategy to face business prospects in 2022, including the following:

1. In implementing the Company’s Work Plan and Budget (RKAP) and the 2022 Social and Environmental Program (TJSL) Work Plan and Budget,
2. The Board of Directors is requested to pay attention to the following matters:
1. RKAP, RKA TJSL, RKA Board of Commissioners, and KPI (Key Performance Indicators) of the Board of Directors for 2022 which have been approved by the Board of Commissioners, serve as a guide for the Board of Directors in implementing work programs and performance targets in 2022 as well as a means of monitoring and supervision for the Board of Commissioners.
2. Encourage the realization of toll road divestment as a source of company cashflow as planned and increase the acquisition of new contracts, especially in the business development project segment, SOEs, and the Government in the 2022 RKAP.
3. Strive for the best (best effort) in achieving the RKAP targets and targets from each aspect set out in the 2022 Strategic Plan by referring to the principles of GCG and professionalism and in accordance with the provisions of laws and regulations.
4. Strive to increase revenue and control costs (cost reduction program) in all lines of business in order to realize more effective and efficient company management, and net profit is the minimum target that must be achieved by all levels of company management.
5. Mitigate risk on aspects that may affect the achievement of the 2022 RKAP.
6. Improve debt management and mitigate its risks, including improving operating cash flow by optimizing project receivables receipts in order to increase funding capacity and maintain the smooth working capital of the Company.
7. Realize investment spending based on a priority scale, according to standard operating procedures, transparent and accountable for the fairness of the price.
8. Observe and implement tactical directions for the Infrastructure Sub-Cluster and other general directions contained in the Aspiration of Dwiwarna Series A Shareholders for the 2022 RKAP,
9. Build company competence through internal talent development of PT Waskita Karya (Persero) Tbk, system and technology development as well as value chain to increase the scale, specialization, and diversification of the Company.
10. Always provide guidance and supervision on the performance of subsidiaries and joint ventures, especially those that make a significant contribution to the Company’s consolidated performance.
11. Evaluate the suitability of the Company’s Long-Term Plan (RJPP) for 2020-2024 with the latest direction and development of the Company’s performance.
12. Ensure the realization of program achievement targets and targets in line with the Sustainable Performance Commitment Agreement (KKB).

The Board of Commissioners views that a number of targets and work plans that have been prepared in the 2022 RKAP are realistic targets and work plans to be achieved. In addition, the Board of Commissioners assesses that the Board of Directors has had adequate strategies and resources as a basis for the Company to optimize opportunities and face a number of challenges that exist in 2022. Based on this view and assessment, the Board of Commissioners is optimistic that the Company will be able to pass the year 2022 optimally with positive financial and operational performance.

Furthermore, the Board of Commissioners gives high appreciation to the Board of Directors and all relevant ranks for the implementation of GCG that was carried out in 2021. The Board of Commissioners assesses that the Board of Directors and their ranks have implemented GCG effectively and thoroughly, in accordance with the applicable laws and regulations and the best practice standards. Moreover, the Board of Commissioners views the Board of Directors as consistently pursuing a strategy for developing a management system towards sustainable development goals (SDGs), as part of the commitment to carrying out business and operational activities that are responsible to stakeholders in accordance with GCG principles.

The Board of Commissioners views that the Board of Directors has implemented GCG through the completeness of adequate structural and soft-structure devices according to the needs and business dynamics faced throughout 2021. The Board of Commissioners also ensures that the Board of Directors and related ranks have carried out an evaluation process on the implementation of GCG in 2021 as a whole, including an evaluation of the completeness of the Company’s GCG tools, the results of which will then become the basis of reference for development plans for the following year. In this regard, the Board of Commissioners has a strong commitment to continuously strengthen the implementation of the supervisory function as a form of support for the overall sustainable development efforts.

The Board of Commissioners ensures that the Board of Directors and related ranks have been able to maintain the quality of overall GCG implementation in 2021 as can be seen through the results of the 2021 GCG assessment carried out according to the criteria in the Decree of the Ministry of SOEs No. SK-16/S.MBU/2012 concerning Indicators/Parameters of Assessment and Evaluation of the Implementation of Good Corporate Governance, which was implemented by independently. The score obtained by Waskita through the assessment for 2021 is 89.75 with a quality qualification of GCG implementation of “Excellent”, which at the same time shows an increase in the score compared to 2020 which was 88.88 with “Excellent” predicate.

Based on the views and assessment results as described above, the Board of Commissioners is optimistic that the Board of Directors and related ranks will be able to develop and maintain the quality of the Company’s GCG implementation optimally in the years to come.

The Board of Commissioners ensures that the Whistleblowing System owned and run by the Company has sufficient organ equipment, according to the needs and business dynamics faced throughout 2021. Structurally, the Company’s Whistleblowing System is run through 3 (three) special organs consisting of SVP - Internal Audit, Investigation Committee, and Final Stage Decision Team (TPTA). SVP - Internal Audit carries out the function of WBS management within the Company, outreach to stakeholders, as well as verifying compliance with complaint requirements. The Investigation Committee specifically carries out investigations through orders from the Board of Directors on incoming complaints. Meanwhile, the TPTA is a special organ that plays a role in making final decisions, through orders from the Board of Directors regarding violations based on the results of the investigation.

In 2021, the Board of Commissioners assessed that the Company has provided adequate channels through a number of platforms that can be easily accessed by reporting parties. The Company has given the reporter a choice in submitting the report, namely by mail, in person, electronic mail, telephone, to sending messages on the whatsapp application. Moreover, the Company has developed a WBS channel at the website address https://wbs.waskita.co.id which allows the reporting system to be available openly, to reach the public as part of the Company’s stakeholders. In this regard, the management of the Company’s WBS has received incoming reports in 2021, all of which have been followed up according to the applicable mechanism.

The Board of Commissioners, supported by the Audit Committee, periodically carries out the monitoring process on incoming reports and the follow-up process. Through this supervisory process, the Board of Commissioners ensures that the followup process carried out by the Company’s WBS organs has been carried out effectively in accordance with applicable regulations. In addition, the supervisory process has also been carried out on aspects of WBS dissemination, especially in the internal scope of the Company. For this matter, the Board of Commissioners considers that the dissemination has been carried out properly and the information conveyed has reached all Waskita Personnel.

The Board of Commissioners considers that the Audit Committee has carried out its duties and responsibilities properly throughout 2021, which includes supervision of the financial reporting process, internal control system, external audit process, the implementation of the Company’s GCG, to monitoring compliance with applicable regulations and laws. Regarding the implementation of these duties, the Audit Committee has carried out the given authority optimally in accordance with applicable regulations. In addition, the Board of Commissioners views that the Audit Committee has carried out a working relationship with Internal Audit, external auditors, and the Board of Directors effectively throughout 2021. The Board of Commissioners ensures that the Audit Committee has submitted reports and held Audit Committee meetings in accordance with the provisions.

The Board of Commissioners ensures that the Risk Management Committee has carried out its overall duties and responsibilities throughout 2021, namely as an organ that carries out the supervisory function of the Company’s risk management. The Risk Management Committee has prepared and submitted an annual activity plan which has been approved by the Board of Commissioners. Moreover, the Risk Management Committee has also carried out periodic assessments and submitted recommendations on the results of the assessments carried out. Throughout 2021, the Board of Commissioners also assessed that the Risk Management Committee was able to carry out an effective working relationship with the Risk Management Unit, in accordance with work guidelines and applicable regulations. The Board of Commissioners ensures that the Risk Management Committee is able to carry out the overall authority granted through independence and maintained objectivity.

Then, the Board of Commissioners considered that the Nomination and Remuneration Committee has supported the supervisory role in the nomination and remuneration field effectively throughout 2021. As a supporting organ for the Board of Commissioners, the Nomination and Remuneration Committee has evaluated and submitted a number of recommendations related to policies and the nomination and remuneration process, as well as carrying out main duties related to monitoring the implementation of GCG carried out by the Company throughout 2021. In carrying out its duties, the Board of Commissioners ensures that the Nomination and Remuneration Committee has carried out regular work meetings in accordance with the procedures and provisions in the work guidelines, which was attended by each member of the Committee.

Fundamentally, the assessment of the performance of each committee in 2021 is a reference for plans and implementation of development in the coming year. For this matter, the results of the performance assessment have become an evaluation material for the Board of Commissioners, and therefore, the Board of Commissioners is optimistic that the implementation of development can be carried out effectively as an overall continuous effort to improve the quality of the Company’s supervisory function.

In addition, there was a member of the Company’s Independent Commissioner, namely Mr. Viktor S. Sirait who sadly passed away on February 18, 2021, which directly influenced the composition of the Board of Commissioners for the period January 1 to April 16, 2021. In this regard, we on behalf of the Board of Commissioners of Waskita would like to express our condolences, as well as deep gratitude for the contribution and dedication that had been given during his tenure as Waskita’s Independent Commissioner.

The composition of the Board of Commissioners for the period from January 1 to April 16, 2021 consists of 1 (one) President Commissioner cum Independent Commissioner, 2 (two) Independent Commissioners, and 3 (three) Commissioners. The details regarding the composition of the Board of Commissioners for the period January 1 to April 16 2021 are as follows:

The composition of the Board of Commissioners for the period from April 16 to September 21, 2021 in accordance with the resolutions of the Annual GMS for 2020 Fiscal Year consists of 7 (seven) members, namely 1 (one) President Commissioner cum Independent Commissioner, 2 (two) Independent Commissioners, and 4 (four) Commissioners.

The details regarding the composition of the Board of Commissioners for the period from April 16 to September 21, 2021 are as follows:

Furthermore, the composition of the Board of Commissioners according to the changes through the Decree of the 2021 Extraordinary GMS consists of 7 (seven) people, namely 1 (one) President Commissioner cum Independent Commissioner, 2 (two) Independent Commissioners, and 4 (four) Commissioners.

The details regarding the composition of the Board of Commissioners for the period of September 21 to December 31, 2021 are as follows:

All members of the Board of Commissioners who served for each period have met the criteria and conditions required in the fit and proper test by the Ministry of SOEs, in accordance with the Limited Liability Company Law, the Company’s Articles of Association, regulations related to corporate governance. as well as other relevant rules and regulations.

The Board of Commissioners believes that the hard work and support given by all stakeholders throughout 2021 will be able to be maintained and improved in the coming year.