South Korea to raise $1.6 billion for green industries

SEOUL (Reuters) - South Korea aims to raise 2.0 trillion won ($1.58 billion) from the private sector and increase fiscal and financial aid to help so-called "green industries," the government said on Sunday.

The money for the industries, which include companies developing alternative energy and eco-friendly cars, will be raised by funds, bonds and savings which are subject for tax incentives, the government officials said.

"It is necessary to build up funding mechanisms that fit the characteristics of green industries by using capital markets as much as possible," the government said in a statement.

The plans come as the country takes steps to ensure a recovery in Asia's fourth-largest economy and as President Lee Myung-bak pledged to support such industries.

From the public sector, the state-run Korea Development Bank (KDB) and state-run pension funds plan to set up a 500 billion won private equity fund in the second half of the year, officials said.

The KDB also aims to set up a 300 billion won fund for research and development (R&D) for the industries. The government will increase a fund for smaller firms in the industries to 1.1 trillion won by 2013 from a 60 billion won this year.

South Korea plans to raise fiscal support for R&D in the industries to 2.8 trillion won by 2013 from 2.0 trillion won this year.

The government will increase credit guarantee support for such companies and projects to 7.0 trillion won by 2013 from 2.8 trillion won this year and triple export financing.

On Thursday, the government said it would help launch a 5 trillion won fund aimed at providing financial support for investments by companies as part of plans to encourage corporate spending.

($1=1265.7 Won)

(Reporting by Cheon Jong-woo and Lee Shin-hyung; Editing by Valerie Lee)