South Korea plans to spend 107 trillion won ($84.5 billion), or 2 percent of its annual GDP, in green industries over the next five years, the presidential office said in a statement on Monday.

The investment, mainly for encouraging environment-related 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.

"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 environmentally friendly."

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

The government also aims to raise South Korea's international market share of green technology products to 8 percent by expanding R&D investment and strengthening industries such as LEDs, solar batteries and hybrid cars.

The world's 4th largest LED producer, Seoul Semiconductor, rose nearly 11 percent on the news, while hybrid car component maker Hyundai Mobis gained 3.7 percent in a flat Seoul market.

The government said it will test trading carbon credits in 2011, for actual trading from 2012 onward.

It will cut greenhouse gas emissions according to mid- and long-term goals to be finalized this year. It also set a target of localizing nuclear power generation technology and exporting a nuclear power plant for the first time by 2012.