Will the World Bank ever learn deregualtion is not the answer?

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This report was on Reuters:

PORT LOUIS (Reuters) - Mauritius has jumped into the top 25 of countries where it is easiest to do business and now comes second only to Singapore in the "Small Island Developing States" category, the World Bank said on Wednesday.

The Indian Ocean island has undertaken a raft of reforms since Prime Minister Navin Ramgoolam took office in 2005, slashing red tape to make it easier for local entrepreneurs and foreign investors alike to set up and run businesses.

This is farcical. Mauritius' so called business friendly environment simply hides a deeply abusive tax haven used to fund much of the inward investment into India and well known as the honey pot for much deep seated corruption in that state. Look at this:

What happens when an economy less than 100th the size of India becomes the largest foreign investor in India? It creates awe. It creates intrigue. And most of all it creates suspicion. Add some politics and alleged involvement of the finance minister's family and the incident becomes a national conspiracy.

That's exactly what has happened to the Indo-Mauritius Double Tax Avoidance Treaty (DTAT). True, investment inflows from Mauritius between 1991 and 1999 totalled up to Rs 12,460 crore, the highest of all countries and about 50 per cent more than the inflows from the US in the same period.

There are only two possible explanations for that: tax abuse and corruption. And that is what the World Bank is in no small part rewarding.

But then ask the question: who works on this? Well, PWC are one principal participant. And the rest is about promoting deregulation: the very thing that is it almost universally agreed has brought about the credit crisis. And then you'll realise why the tinkering at the edges of Bretton Woods on Saturday will achieve almost nothing. Fundamental reform is needed in the mind set of these organisations. Nothing else will do.