There are a few major drawbacks to using an examination system in underdeveloped countries. Of course, this does not mean that the system has no value. It simply means that there are problems associated with it.
One of the major problems with an examination system is that many of the students in such a country will be unprepared to take examinations. This can lead to situations like the one in Libya last month (August, 2013) in which every student who took university entrance exams failed. This can lead to a loss of faith in the educational system as well as possible pressure to make the tests easier so that students can pass.
A second problem is that this system might perpetuate inequality in the country. If there is an examination system, it will feel like it is fair because everyone is being judged on an objective basis. But the fact is that only the children of the elites will have a good chance at getting an education that will allow them to pass the examinations.
Finally, an examination system can be very expensive. Tests must be administered properly and marked properly. This costs a lot of money and can lead to students being charged more than they can afford to pay.
All of these issues make an examination system less appealing for use in a developing country.