We express our praise and gratitude to the presence of God Almighty, thanks to His mercy and grace, PT Wijaya Karya Bangunan Gedung Tbk has successfully navigated the year 2023 with good performance in terms of management of the Company supported by a proven track record and competitive advantage in the building construction industry.

During the year 2023, the Board of Commissioners, as one of the Organs of the Company, has collectively fulfilled its duties and responsibilities to supervise and advise the Board of Directors and to ensure that the Company implements good corporate governance (GCG). The Board of Commissioners performs its duties and responsibilities independently, guided by the provisions of the Company’s Articles of Association, the Good Corporate Governance Guidelines, the Board of Commissioners Manual, prevailing laws and regulations, and based on the GCG principles.

It is our pleasure to report to the shareholders on the performance of our duties and responsibilities as a Board of Commissioners regarding the oversight of the management of the Group, the provision of advice to the Board of Directors and the implementation of the Company’s strategies for 2023.

The world’s hopes for a continued improvement in global economic conditions as the Covid-19 pandemic is brought under control are beginning to fade. Geopolitical escalation in Europe and the Middle East has impacted limited supply and caused global inflation to rise. The Federal Reserve’s gradual increase in the federal funds rate to 5.50% has caused turmoil in world financial markets. As a result, various world currencies have weakened against the US dollar as capital flows from emerging market economies (EMEs) to developed countries and to more liquid assets have reversed.

This condition resulted in the global economic growth slowing down to 3.1% in 2023 from 3.5% in the previous year as reported by the International Monetary Fund (IMF). However, the Indonesian economy was still able to grow by 5.05% yoy in 2023, although it was actually lower than 5.31% yoy in the previous year. This performance deserves to be appreciated as Indonesia also faced inflationary pressures, prompting Bank Indonesia to gradually raise its benchmark interest rate (BI7DRR) to 6.00% in 2023.

Apart from being supported by household consumption expenditure, which grew by 4.82% yoy and contributed 52.73% to the total Gross Domestic Product (GDP), Indonesia’s economic growth was also supported by the growth of various sectors, including the construction industry. This industry grew by 4.91% yoy in 2023 compared to the growth of 2.01% yoy in the previous year. The implementation of the infrastructure budget, which grew by 7.2% yoy to approximately Rp399.6 trillion, is one of the key factors driving the growth of this industry, apart from the development of the National Capital City (IKN).

Directors’ Performance and Basis for Evaluation

The role of the Board of Commissioners is to supervise the management policy, the course of management in general regarding both the Company and its business conducted by the Board of Directors, as well as to advise the Board of Directors, including supervising the implementation of the Company’s long-term plan (RJP), work plan and budget (RKAP) for the benefit of the Company and in accordance with the Company’s objectives.

The performance of the Board of Directors is measured based on fulfilling the duties and responsibilities as well as the goals set by the respective Board of Directors, which are aligned with the Company’s goals. In addition, as a SOE-owned company, the performance evaluation of the Board of Directors is also guided by the regulations set by the Ministry of BUMN using Key Performance Indicators (KPI).

The Board of Directors KPI is translated into 5 (five) priority programs as evaluation criteria, namely aspects of economic and social value for Indonesia, aspects of business model innovation, aspects of technology leadership, aspects of increasing investment, and aspects of talent development. In addition, there are also individual KPIs for the Board of Directors’ members, which are prepared in accordance with the duties, functions and responsibilities of each Board of Directors’ member.

Based on these assessment criteria, the achievement of corporate KPIs embedded as Directors’ KPIs recorded a score of 1,026 against a target of 1,000. Although the cumulative performance exceeded the set targets, the Board of Commissioners provided suggestions on areas for improvement, particularly in terms of economic and social value for Indonesia. This is inextricably linked to a number of financial indicators that were not in line with targets.

The Board of Commissioners understands the achievement of operational targets in 2023, such as new contracts and order book lower than the target set. The project owner’s decision to wait for the confirmation of the results of the public elections in February 2024 is likely to have an impact on this achievement. Moreover, in 2023 there was also a challenging situation of rising benchmark interest rate, which affected loans distribution, including loans to the construction sector.

One thing that deserves to be appreciated by the Board of Commissioners is that the Company has been able to record a stronger equity of Rp2.56 trillion in line with the higher revenue of Rp3.98 trillion with a 68.19% yoy growth in 2023. This achievement strengthens the ability of the Company to meet its financial obligations with a constantly improving ratio of interest-bearing debt to shareholders’ equity. This is important to confirm the Company’s solid financial ability to meet its financial obligations to creditors in the midst of market concerns about the financial condition of SOEs, which operate in the construction sector.

In addition, the delivery of a project on time, on budget and above target is worthy of recognition. The speed of project completion, combined with project quality that meets the project owner’s expectations, will not only accelerate cash flow, but also increase the project owner’s satisfaction. This is consistent with the achievement of an above-target Customer Satisfaction Index (CSI). The CSI is the result of an independent survey of the satisfaction of the company’s external customers.

Supervision of the Company’s Strategy Implementation and Providing Advice to the Board of Directors

The Company promotes appropriate relations among the Company Organs. Each Company Organ shall at all times respect and act in accordance with its respective functions and roles, relating to each other on the basis of the principles of equality and mutual respect. Members of the Board of Commissioners, individually and collectively, may have access to information relating to the management of the Company.

Any working relationship between the Board of Commissioners and the Board of Directors is an institutional relationship in which the Board of Commissioners is a collective position representing all other Board of Commissioners members. Therefore, any working relationship between a Board of Commissioners member and one or more Board of Directors members must be known to the other Board of Commissioners members.

The function of supervising the management of the Company by the Board of Directors, advising the Board of Directors and implementing the GCG is carried out through meetings of the Board of Commissioners, both internal meetings and joint meetings with the Board of Directors, as well as meetings between the Board of Commissioners and its committees.

The President Commissioner presides over the meetings and may be represented by other members of the Board of Commissioners in his absence, as stated in the Board Manual. During the year 2023, the Board of Commissioners held 11 (eleven) internal meetings. The holding of this meeting exceeds the provisions of POJK No.33/ POJK.04/2014 on Directors and Commissioners of Issuers or Public Companies and the Articles of Association, which require that the meetings of the Board of Commissioners shall be held at least once every 2 (two) months.

Meanwhile, 11 (eleven) joint meetings were held during 2023. The holding of these joint meetings is also more frequent than the provisions of POJK No.33/POJK.04/2014 and the Articles of Association, which require that the meetings shall be held periodically at least once every 4 (four) months.

These meetings become a forum for the Board of Commissioners to discuss various issues related to the Company’s performance, both in the Company’s Work Plan and Budget (RKAP) and in the Company’s Long Term Plan (RJPP). The meeting also discussed the Company’s transformation, the Company’s quality, safety and environment, the GCG, and the effectiveness of existing functions within the Company’s organization.

In addition, the Board of Commissioners, together with the Directors, visited the project in order to perform its oversight function over the construction of the construction projects in 2023.

Views of the Board of Commissioners on the Implementation of Corporate Governance

In carrying out its day-to-day responsibilities in accordance with the principles of the GCG, the Board of Commissioners has established committees to assist the Board of Commissioners in fulfilling its oversight function. In addition to the Audit and Risk Committee, the Board of Directors has formed a Nomination, Compensation & GCG Committee to assist and be accountable to the Board of Directors for improving and perfecting GCG practices within the Company.

The Board of Commissioners appreciates the best efforts of the GCG structure of the Company in the implementation of the GCG principles at all levels of the organization of the Company. A strong synergy involving all corporate bodies has enabled the GMS, meetings of the Board of Commissioners, the Board of Directors, joint meetings and committee meetings to be held in accordance with applicable regulations. The implementation of the duties and responsibilities of each corporate body is also a support to the efforts for the implementation of GCG best practices.

In addition, the Board of Commissioners appreciates the steps taken by the Company’s Organs to update the Company’s Code of Conduct, Board Manual, Audit and Risk Committee Charter and procurement procedures in 2023, which reflect the Company’s strong commitment to implementing the GCG principles.

The Board of Commissioners also expressed its appreciation for the Company’s commitment to develop its business taking into account economic, social and governance (ESG) issues. The efforts made to further develop the implementation of the GCG by all the Company’s Organs also provide a strong foundation for sustainable growth.

Assessment of the Performance of Committees under the Board of Commissioners

The Board of Commissioners is assisted in its duties and functions by two committees, namely the Audit and Risk Committee and the Nomination, Remuneration and GCG Committee. These two committees provide an important input to the Board of Commissioners in the exercise of its supervisory and oversight functions. The activities and the organization of the meetings of each committee provide recommendations that can be used by the Board of Commissioners to provide guidance and advice to the Board of Directors.

The Audit and Risk Committee has supported the duties of the Board of Commissioners, as evidenced by the fulfillment of 8 (eight) points in the Audit and Risk Committee Charter throughout the year 2023, which is a reflection of the implementation of the committee’s duties and activities. This Committee has also held 38 (thirty-eight) meetings during the year 2023, or much more than the minimum required meeting, namely 1 (one) time per month or at least equal to the minimum required meeting for the Board of Commissioners.

The Nomination, Remuneration & GCG Committee is also in a position to assist the Board of Commissioners in performing its supervisory function well. This is reflected in the fulfillment of 8 (eight) points in the Nomination, Remuneration & GCG Committee Charter during 2023 with respect to the implementation of the committee’s duties and activities. This committee also held 14 meetings during 2023. This exceeds the minimum requirement for this committee to meet once every 3 (three) months.

Meanwhile, the Secretary of the Board of Commissioners is also considered capable of performing his duties well in supporting and assisting the smooth implementation of the functions and effectiveness of the role of the Board of Commissioners, especially in the area of administration.

Views on the Implementation and Management of the Whistleblowing System (WBS) and the Role of the Board of Commissioners in the WBS

The Company always strives to provide the best service to various stakeholders. The Company understands and recognizes the rights of stakeholders to submit complaints regarding problems they have experienced. The Company has provided effective complaint handling services through the available complaint handling mechanisms. The Good Corporate Governance Compliance Team has provided a complaint facility for this purpose, including a guarantee of confidentiality, as stipulated in the Company’s Code of Conduct.

Each part of the Company’s Organs is obliged to provide full support to the GCG Compliance Team in the follow-up of reports of alleged violations of the implementation of the Employee Code of Conduct. The results of the follow-up actions taken by the GCG Compliance Team will be presented to the Board of Directors or the Board of Commissioners according to their scope and responsibilities. The Board of Directors and the Board of Commissioners are authorized to provide for sanctions, coaching and/or other relevant matters regarding alleged violations of the Employee Code of Conduct.

The Board of Commissioners is pleased with the achievement of zero reports of violations within the Company during the year 2023. The Board of Commissioners always encourages all employees of the Company to use the Whistleblowing System (WBS) as one of the best efforts to strengthen the application of GCG principles in every business activity of the Company at all levels of the organization.

The world is expected to face economic challenges in the coming year amid the geopolitical crisis. The crisis isn’t expected to be resolved until the first quarter of 2024. The International Monetary Fund (IMF) estimates that global economic growth will be stagnant at 3.1%, while other leading financial institutions such as the World Bank and the Organization for Economic Co-operation and Development (OECD) expect global GDP growth to slow to 2.4% and 2.9%, respectively.

Nevertheless, Indonesia’s economic fundamentals, which remain strong with an economic growth of 5.05% in 2023, supports the government’s optimism in setting a growth target of 5.2% next year. In line with this estimate, Bank Indonesia expects Indonesia’s GDP growth to reach 4.7 - 5.5% in 2024.

This economic growth projection is supported by the growth of various economic sectors, including the construction industry, which is expected to improve in the coming year, supported by Bank Indonesia’s estimated investment growth of 5.1 - 5.9 percent. Another driving factor for the growth of the construction industry is the higher infrastructure budget allocation of IDR 422.7 trillion in 2024. One of the objectives of this budget is to accelerate the completion of the IKN development. The construction of the IKN itself is divided into five phases and is expected to be completed in 2045.

In addition to the project owners from the Indonesian government, the company will optimize the construction projects with the project owners from the BUMN and the private sector. Prospects for the construction of high-rise buildings such as hospitals, apartments and offices are in line with Indonesia’s population growth.

In light of these considerations, the Board of Directors is of the opinion that the various strategic initiatives and policies to be implemented by the Board of Directors in the coming year are in line with market conditions and Indonesia’s economic outlook. The new project target of Rp5.07 trillion in 2024 is expected to increase the order book to IDR 13.42 trillion, which will positively impact the Company’s performance next year.

Composition of the Board of Commissioners Changes in Accordance with AGMS Decision

The composition of the Company’s Board of Commissioners was changed as a result of the AGMS decisions on May 10, 2023. One of the decisions was to approve the honorable dismissal of Mr. Hananto Aji as President Commissioner and subsequently to transfer the assignment of President Commissioner to Mr. Sumadi. The AGMS also approved the appointment of Suli Fatimah and Danis Hidayat Sumadilaga as Company Commissioners. In addition, the AGMS approved the honorable dismissal of Bambang Pramujo as Company Commissioner.

Previously, the Company received Hananto Aji’s letter of resignation from the position of President Commissioner effective April 14, 2023 in accordance with the BUMN Ministerial Regulation No.: PER-3/MBU/03/2023 on Organs and Human Resources of State-Owned Enterprises (BUMN), which prohibits BUMN Directors from serving as President Commissioners in subsidiaries/affiliated companies of the respective BUMN.

Accordingly, the composition of the Board of Directors of the Company as of December 31, 2023 was as follows:

* Acting President of the Commission on the basis of the Circular Letter of the Board of Commissioners No. 05.B/DK/WG/2023.
** Resignation as Independent Commissioner on December 5, 2023

On behalf of the Board of Commissioners, we would like to express our appreciation to Hananto Aji and Bambang Pramujo for having served as members of the Company’s Board of Commissioners. With the current Board of Commissioners, we are committed to working hard together to perform the Company’s supervisory function to achieve goals consistent with the Company’s vision and mission.

In closing, the Board of Commissioners would like to express its deep appreciation and gratitude to all of our shareholders and stakeholders for the support they have provided. We also express our deep appreciation to all project owners for their continued confidence and loyalty. We also thank all the management and employees for their hard work throughout the year and for maintaining the Company’s position as one of the leading building construction companies in Indonesia that upholds economic, social and governance (ESG) aspects in its business processes.

On Behalf of the Board of Commissioners,

SUMADI

President Commissioner