The Malay Dilemma: Is the Malaysia ETF a Safe Emerging Market Investment?

If western investors ever think of Malaysia, they probably think of the Petronas Towers, the sodomy trials of opposition leader Anwar bin Ibrahim and controversial former Prime Minister Mahathir bin Mohamad instead of the “The Malay Dilemma,” the latter’s just as controversial book that has largely set the country’s course for the past 40 years. It doesn’t help when the iShares MSCI Malaysia Index Fund ETF (EWM) is the only easy way for most western investors to invest in Malaysia – making the country Southeast Asia’s forgotten emerging market.

Petronas Towers, Kuala Lumpur
Should you invest in the iShares MSCI Malaysia Index Fund ETF (EWM) with elections looming?

However, Malaysia may soon be on the radar of western media and investors alike again this year because the Barisan Nasional (BN), the coalition of political parties that has ruled Malaysia for 54+ years, must hold elections by the end of June. Moreover, Malaysia’s large Chinese and Indian minority populations along with both liberal and Malay Islamic conservatives are restive for change.

But before you consider investing in Malaysia or the iShares MSCI Malaysia Index Fund ETF, it would be a good idea to have a more thorough understanding of what “The Malay Dilemma” is along with the country’s current political situation.

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Will Emerging Markets and Berjaya Corporation Save RadioShack?

RadioShack in Kuala Lumpur, Malaysia

RadioShack Corporation (RSH) is one of the few remaining consumer electronics retailer stocks left in the United States after Circuit City Stores filed for bankruptcy and it has the dubious distinction of being on even shakier ground than Best Buy Co. (BBY), but could emerging markets and a Malaysian conglomerate called Berjaya Corporation be the company’s trump card for survival?

RadioShack in Kuala Lumpur, Malaysia
RadioShack’s new flagship Kuala Lumpur store in the Berjaya Times Square mall.

To start with, Berjaya Corporation is RadioShack’s franchise partner in Malaysia and it has aggressive expansion plans to bring the store to the emerging markets of Southeast Asia beginning with Malaysia, where I recently visited, photographed and was completely wowed by one of their new stores. From my visit, it was also clear to me that the RadioShack’s American executives could even learn a few lessons from what Berjaya Corporation in Malaysia is doing to make what is fast becoming yet another failed American brand and concept to actually work for the long-term.

After all and in the United States, RadioShack has attempted to revive itself by selling tablets and smartphones, but these new products have lower profit margins and face stiff competition from online retailers plus the telco carriers themselves. RadioShack also has a ridiculously unprofitable partnership with retail giant Target Corporation (TGT) to sell mobile devices in 1,400 Target stores while the company is rudderless at the top after its CEO resigned in September after only one year on the job.

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