You seem to be overlooking the fact that most of the times the academic credentials of a candidate tend to be directly proportional to his/her performance. In places like South Korea or India (my place), it is damn hard to find qualified people for the posts of professors even in 'Institutes of Excellence' like the IITs. There's an astronomical amount of gap between the amount of funding a normal university receives and the grants that IITs receive. It should be then very easy for a prospective employer to decide between a candidate from IIT and one from a normal university. The candidate from IIT most probably (99.99%) outperforms the other guy.
That's why admission to the IITs becomes the all-important thing not only for the students, but also to the parents whose only hope to get rich is through their wards. The offshoring / outsourcing phenomenon further catalyzes the sexiness of 'Brand IIT' as the students from IIT end up with offers from MNCs, which are far more lucrative than what the Indian Space Research Organization offers to its most senior scientist.
IITs get to chose their students from a vast pool of 500,000 students who cram day and night for more than 3 years during their high school. This further adds to their glamor. Hence it is not uncommon to find companies preferring a chemical engineering graduate from an IIT over a computer science graduate from other universities for the job of a programmer.
Thus third world citizens still live in the age where "Credentials Do Matter".