July 6 (Bloomberg) -- South Korea, Asia’s third-biggest crude oil importer, plans to invest 107 trillion won ($84 billion) over the next five years in improving energy efficiency to help cut reliance on fossil fuels and boost economic growth.

The spending on developing solar power, hybrid cars and energy-efficient lighting may help create as many as 1.8 million jobs and generate industrial output of as much as 206 trillion won, President Lee Myung-Bak’s office said in a statement today. Oil accounts for 14 percent of the country’s import bill.

Seoul Semiconductor Co., a maker of components used in energy-saving lighting, surged 11 percent before the announcement on speculation the government would support so-called “green” technology. Asia’s fourth-largest economy will spend about 2 percent of its gross domestic product annually by 2013 to reduce carbon emissions and diversify its exports, said Youk Hyun Soo, an official on the presidential committee for renewable energy.

“It’s too early to say the package will work soon,” said Hwang Chang Joong, the head of investment strategy at Woori Investment Securities Co. “South Korea is joining the U.S. and China in increasing public spending on the industry to achieve economic growth and energy-saving at the same time.”

U.S. President Barack Obama has pledged to spend $150 billion over 10 years to combat climate change and create “green” jobs. China plans to spend about 100 billion yuan ($15 billion) to more than double its wind power capacity by 2010 from last year and is subsidizing solar generation as it targets a fivefold increase in the country’s capacity to produce electricity from sunlight by 2020.

Economy, Shares

South Korea’s jobless rate rose in May to the highest in almost four years as a slump in overseas demand prompted companies to fire workers to cut costs. The economy expanded 0.1 percent in the first quarter, avoiding a recession with the help of government spending and lower borrowing costs.

Seoul Semiconductor rose the most since May 15 to close at 32,000 won in South Korean trading. Samwha Electric Co., which produces capacitors for hybrid cars, rose 7.3 percent, the most since April 29. LG Chem Ltd., which plans to sell batteries used in electric cars, gained 0.7 percent. The benchmark Kospi index advanced 0.6 percent.

South Korea’s planned investments include the 7.3 trillion won that the government said in January it will spend by 2013 on 10 industries such as alternative energy and robot technology, Youk, an assistant director at the Presidential Committee on Green Growth, said by telephone in Seoul.

The government said it will also allow banks to offer tax- free ‘Green Savings Deposits’ and ‘Green Bonds’ to individual investors, and set up a 500 billion-won ‘Green Fund’ to invest in companies that make energy-saving products.

‘Green’ Funds

JPMorgan Asset Management agreed in June to set up funds totaling more than $1 billion to invest in South Korea’s alternative energy industry, making it the first overseas company to participate in the country’s go-green initiative.

The government spending will include investments in luminescent diodes, used to make energy-saving flat-screen panels and lighting bulbs and solar-powered batteries, according to today’s statement.

South Korea’s car industry, the world’s fifth largest, will be required to make vehicles more fuel efficient. Carmakers must boost vehicle mileage to 17 kilometers per liter on average or emit less than 140 grams of greenhouse gases per kilometer of drive by 2015, the presidential office said.

Vehicle Emissions

Currently, vehicles with 1.6-liter engines and below are required to clock mileage of at least 12.4 kilometers per liter, the Ministry of Knowledge Economy said. For vehicles with engines exceeding 1.6 liters, the limit is 9.6 kilometers.

The country’s greenhouse-gas emissions increased to 599.5 million metric tons in 2006 from 594.4 million tons the previous year, the ministry said in February. That’s about double the 298.1 million tons in 1990.

South Korea isn’t bound by the Kyoto treaty to stem climate change, which requires industrialized nations to trim emissions by about 5 percent from 1990 through 2012. The world’s 10th biggest producer of greenhouse gases plans to announce emissions- reduction targets by the year-end.

To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net; Heejin Koo in Seoul at hjkoo@bloomberg.net

Last Updated: July 6, 2009 06:28 EDT