UPDATE 2-S.Korea to spend $85 bln on green industries

* Five year spending plan aims to generate 1.8 mln jobs

* Stricter auto emission standards planned

* LED producer Seoul Semi soars, Hyundai Mobis gains (Adds analyst quotes, more details and byline)

By Cho Meeyoung

SEOUL, July 6 (Reuters) - South Korea will invest 107 trillion won ($84.5 billion), or 2 percent of its annual GDP, in environment-related industries over the next five years, the presidential office said in a statement on Monday.

The investment, mainly for encouraging green growth industries and technologies such as renewable energy, LEDs (light-emitting diodes), smart power grids and hybrid cars, is expected to create up to 1.81 million jobs, the government said.

Under President Lee Myung-bak's regime, Seoul's Blue House has been trying to find a way to revitalise the country's slowing economic growth by capitalising on the global drive to reduce polluting gas emissions.

"The investment is a move in the right direction as it signals the government's intention to boost its competitiveness by leading in the greentech sector," said Yong-Jin Kim, Head of Global Business Group at Daishin Investment Trust Management.

"Korea could be a niche player in the global greentech market as it promotes its LEDs and other manufacturing industries such as the auto industry with the focus on doing research to make production processes environmently friendly."

The government gave no specific details over how it would fund the plan.

As part of the plans the government will require automakers including Hyundai Motor (005380.KS) and Kia Motors (000270.KS) to either raise the average fuel efficiency of their vehicles above 17 km per litre or cut greenhouse gas emissions below 140 grammes per kilometre from 2012, the Blue House statement said.

ABOVE US STANDARDS

"To advance in green car development, South Korea plans to raise the bar for auto fuel efficiency and greenhouse gas emission rules above U.S. standards," a separate statement from the government said.

Cars made in South Korea, the world's fifth largest auto producer, currently have an average fuel efficiency of 11 km/litre and emissions of 201 g/km

Aggressive new standards unveiled by the United States in May would raise average fuel efficiency standards for all new passenger vehicles to 35.5 miles per gallon by 2016, the equivalent of 15.1 km/litre. [ID:nN18364500]

South Korea will apply the new fuel efficiency and emission rules to 30 percent of cars sold by each automaker in 2012, rising to 100 percent by 2015.