Nothing? What are you talking about? It validates the file as the OP requested.

...Actually, that's now what he requested. He requested

use XML::LibXML::Reader qw( XML_READER_TYPE_ENTITY_REFERENCE );

my $reader = XML::LibXML::Reader->new(
   location        => $file_or_url,
   load_ext_dtd    => 0,
   expand_entities => 0,
);

while ($reader->read) {
   die if $reader->nodeType == XML_READER_TYPE_ENTITY_REFERENCE;
}
[download]

What exactly is the problem???