Well, not to defend the practice, but I think a reason for demanding application from abroad, is that if you decide to deny renewal, now they don't get back in. Whereas if you can apply from within the country, then people who are denied renewal can refuse to leave, go underground etc.

Even with this pretext though, it's a good example of a rule which punishes the law-obedient. People who intend to stay in the country illegally won't go abroad to reapply in the first place.