Reducing the Complexity of Today’s Challenges for the Next Generation

The complexity of the nation’s current challenges must be reduced by addressing problems gradually so they do not become a burden on future generations. Their challenges are certain to grow heavier as the digital revolution and the use of artificial intelligence (AI) transform almost every aspect of human life.

The issues facing Indonesia are already a shared concern. They range from geopolitical uncertainty, security and law enforcement to global economic pressures, poverty and unemployment. These problems are interrelated and require serious, focused and sustained action.

In the employment sector, for example, the Ministry of Manpower recorded 63,789 workers laid off between January and September 2026, based on reports submitted through the Job Loss Insurance (JKP) system. Meanwhile, Statistics Indonesia (BPS) data for May 2026 showed that unemployment stood at 7.22 million, with an open unemployment rate of 4.65 per cent.

Pressure is also evident in the fiscal position and the exchange rate. By September 2026, the state budget deficit had reached Rp319 trillion, or 1.24 per cent of gross domestic product (GDP). In the second week of October 2026, the rupiah traded at around Rp17,850 to Rp17,950 against the US dollar. The rupiah’s weakness amid rising energy prices is putting further pressure on production costs and business activity.

In these circumstances, Indonesia must maintain investor confidence. With a population of nearly 300 million, the country has enormous market potential. However, that potential remains constrained by bureaucratic inefficiency, corruption and transparency problems that hinder the investment climate.

The capital market offers a clear example. Concerns about an evaluation by Morgan Stanley Capital International (MSCI) have fuelled negative sentiment on the Indonesia Stock Exchange (IDX). The Jakarta Composite Index (JCI) fell below the psychologically important 6,000 level in the second week of October 2026, while foreign outflows, or net selling, reached Rp84.99 trillion by 9 October 2026.

The situation drew further attention after MSCI on Thursday (15 October 2026) opened a consultation on a proposal to downgrade Indonesia’s equity market from Emerging Market to Standalone Market status. If this happens, Indonesian stocks will no longer be included in the MSCI Emerging Markets or MSCI Frontier Markets indices. The issue concerns global investors’ confidence in the credibility of the domestic capital market.

Firm action is therefore needed to restore market confidence. The Attorney General’s Office, the National Police and the Financial Services Authority (OJK) must act transparently and without compromise against coordinated trading and share-price manipulation, in order to regain MSCI’s confidence before 30 April 2027.

Capital market reforms must also be accelerated by requiring disclosure of shareholdings above 1 per cent and tightening the minimum free-float requirement to 15 per cent. Bank Indonesia and the Ministry of Finance should prepare monetary instruments and foreign-exchange market intervention to address the potential outflow of Rp102 trillion in foreign funds. At the same time, the domestic investor base—including pension funds, insurers and retail investors—must be strengthened to reduce reliance on speculative foreign capital.

Environmental Challenges and the Nation’s Future

Another issue requiring serious attention is forest and land fires. Fires that began in June and peaked in August 2026 affected Sumatra, Kalimantan, Papua, East Nusa Tenggara and West Nusa Tenggara. Hundreds of thousands of hectares are estimated to have burned, causing ecological damage, health problems including acute respiratory infections (ARI), and smoke pollution reaching Malaysia and Singapore.

The fires are a more complex problem because they are linked to corporate activity and land management. Of 66 Singapore-domiciled companies connected to the fires, 49 were part of Indonesian business groups. Two groups, Sinar Mas and First Resources, were linked through their capital chains to 59 per cent of tracked hotspots. Meanwhile, in the Merauke National Strategic Project (PSN) area, 84 per cent of hotspots were located within land clusters directly managed by the state.

A combination of drought caused by El Niño and the Indian Ocean Dipole (IOD), dry peatlands and land clearance by burning has made the situation worse. During extreme drought, peatlands account for around 64–74 per cent of carbon emissions despite their relatively limited area. In July 2026, the area burned outside official records doubled to 202,004 hectares, while satellite data recorded around 900,000 hectares, with estimated emissions of 150 million tonnes of carbon.

These conditions show that fire management must place greater emphasis on prevention to stop similar disasters from recurring. The state must ensure that land is managed responsibly and that environmental damage is curbed.

No less important, as it works to resolve today’s problems, Indonesia must also prepare for a far more complex future. The digital revolution and advances in AI are continuing to reshape human life, including the economy, national defence, and the country’s unity.

These changes demand greater preparedness from the next generation. Young people must be able to adapt to technological developments, acquire relevant skills and withstand increasingly intense competition.

The state must therefore take a more systematic approach to developing human resources. Indonesia’s young people need education, skills-development and competency-building programmes that will enable them to keep pace with the digital revolution and AI.