When a Saudi policeman stepped into a Riyadh travel agency, the Indian salesman thought he just wanted to buy a ticket.

Instead, a few minutes later the salesman was driven to jail and packed into a cell crowded with 200 men. His crime? Not being Saudi.

The Indian man and other foreign travel agents are the latest expatriate workers feeling the impact of Saudi Arabia's drive to "Saudiise" its workforce after decades relying on cheap outside labour.

Facing a population explosion and growing unemployment, the Saudi government ruled that from the start of the Islamic year – which began in late February – travel firms must employ Saudi nationals. Now it is showing it meant it. "When they took us to the jail we thought they would just take our details and release us. But they put us in a cell, about 200 people in a room for 80 or 90," said another travel agent from Mumbai who, like his colleague, declined to be named.

"The next morning they came to shave our heads. It was a real humiliation, as if we were criminals – and then they charged us five riyals ($1.30)," he said.

"I think about 80 per cent of the travel offices have been affected, because they do not all have Saudi employees." Most people had believed the target for this year was to fill a third of the jobs with Saudis, not the whole travel industry.

In Riyadh's bustling market centre of Batha, several travel agents put up the shutters after their employees were banned.

The few shops that were open were staffed by Saudis, but most were still being run by Indian and Pakistani workers, nervously scanning the street for policemen. One man stood by the office door, saying he planned to disappear into the crowd if officials came.

The "Saudiisation" of the travel business follows similar steps to ensure 100 per cent Saudi employment in the kingdom's popular gold and jewellery business. Gold shops were told three years ago to prepare for complete Saudiisation. But many failed to meet the February deadline, thinking the government might relent and fearing loss of business if they sacked experienced staff.

In one street of gold merchants in Batha, five out of 14 shops were closed earlier this month.

"My boss has told me to wait a few weeks and see what happens," said an out of work Indian gold salesman who has worked in Saudi Arabia for 10 years.

Goldsmiths from neighbouring Yemen, the traditional jewellers of the Gulf, have also suffered from the move. Earlier this month a Yemeni newspaper published a letter from Yemenis in Saudi Arabia appealing to their president to intervene to save their livelihoods. But Saudi Arabia is determined to push ahead with a process which it says is key to delivering jobs to the more than 100,000 Saudis who join the labour market every year.

The world's biggest oil exporter hosts up to six million expatriate workers and their families but says it cannot continue employing foreigners while so many of its 18 million native population are out of work.

Official figures put unemployment at 9.6 per cent. But economists say the rate is significantly higher and only half a million Saudis are employed in the private sector, the Labour Ministry reported last year. The travel industry is estimated to employ 25,000 people.

"The Saudiisation campaign will continue until the authorities achieve 100 per cent Saudiisation in the gold market and the travel agencies," deputy Labour Minister Ahmad Al Mansour said in response to the detentions.

Not all ministers have given the campaign their unqualified backing.

Trade Minister Hashem Yamani said earlier this year that demanding a fixed proportion of Saudi nationals in private sector firms might actually cut job opportunities for Saudis if it reduced efficiency and hurt the wider economy. "To me, the goal of creating an expanding economy is the priority objective which, while it is being achieved, will create more jobs for the growing Saudi population," he said.