South Korea commits $85bn to develop eco-friendly industries

The South Korean government yesterday released further details of its plan to invest $85bn (52.4bn) in "green growth" areas over the next five years as part of its economic stimulus package.

The sum is equivalent to around two per cent of the country's annual gross domestic product through to 2013 and is intended to help generate $162bn (£99.9bn) in economic output and create up to 1.8m jobs.

Under the package, which was formally announced yesterday, capital will be provided for research and development in renewable energy technologies, such as solar and wind power, hybrid cars and biofuels.

Meanwhile, a state fund will offer credit lines to small and medium-sized firms that are developing eco-friendly technologies, and the government will also encourage more private funding into the sector by offering tax breaks and loan guarantees to green companies.

Individuals will be given tax exemptions on interest income from bonds and other investment products issued by banks to help finance green projects.

"The plan will not only help reduce greenhouse gas emissions, but it will also provide us with a new growth engine," Kwon Tae-shin, minister for policy co-ordination, told the Economic Times.

The announcement is the latest in a series of measures from the South Korean government designed to establish the country as a regional rival to emerging clean tech hubs in China and Japan.

In May, the government announced it would spend $10bn over the next five years to develop green technologies such as high-efficiency solar cells, LPG hybrid cars, LEDs, smart grid networks and fuel cells.

It is not clear whether the new package includes the $10bn (£6bn) commitment, or whether it will encompass a $38bn (£23.4bn) Green New Deal policy unveiled in January that focuses on a wide range of low-carbon and climate change adaptation projects.