South Korea and Mongolia on Sunday agreed to seek a bilateral free trade pact, Seoul's presidential office Cheong Wa Dae said, a move to build an institutional framework to bolster mutual trade and investment.

The agreement was reached during a summit between President Park Geun-hye and her Mongolian counterpart Tsakhiagiin Elbegdorj.


Park is currently in Ulaanbaatar for a two-day official visit after attending the Asia-Europe Meeting that ended Saturday.

During the summit, the two sides also agreed to seek South Korea's participation in Mongolia's 14 projects, including some urban development schemes and infrastructure programs to build power plants and railways, and expand electricity transmission networks.

The projects are estimated to be worth $4.49 billion in total. To support South Korea's participation in these projects, the two sides signed 20 memorandums of understanding, mostly over bilateral economic cooperation.

The signing of the MOUs was the culmination of the efforts that the two nations have made to deepen and widen bilateral ties since they opened diplomatic ties in 1990.

To pursue the bilateral "economic partnership agreement,” the two sides concurred on the need to initiate joint research on it as early as late this year. The EPA is similar to a free trade deal, and focuses on industrial and investment sectors, Seoul officials explained.

Mongolia is pushing for a "third neighbor policy" aimed at reducing its heavy economic reliance on China and Russia, with the two major powers extending their geopolitical influence over the resource-rich, landlocked country.

As part of the policy drive, Mongolia has recently been striving to deepen ties with South Korea, Japan and the United States. Ulaanbaatar already signed its first EPA with Tokyo in February 2015, which went into force last month.

It took some six years for Japan and Mongolia to have their EPA effectuated after launching joint research on it in 2010. It may take less time for Seoul and Ulaanbaatar to conclude their EPA negotiations, Seoul officials said.

Through the envisioned EPA, the two sides hope to bolster their trade volume that has continued to decline in recent years. Their trade, which stood at $411 million in 2011, dipped to $292 million last year due largely to Mongolia's economic downturn.

Kang Seog-hoon, the senior presidential secretary for economic affairs, said that Mongolia had been reluctant to ink another free trade pact due to the public sentiment against the latest deal with Japan. Mongolians believe the balance of interest in the deal favors Japan.

Of the 20 MOUs singed on the occasion of the bilateral summit, several arrangements aim to create business opportunities for South Korea's small and medium-sized enterprises, seeking to advance into the Mongolian market with a population of 3 million.

During her visit here, Park is being accompanied by a large business delegation consisting of 109 South Korean firms, mostly SMEs.

Some of the two-way MOUs are related to infrastructure projects that Mongolia has been carrying out to support its massive development of mines, such as those to build power plants and infrastructure needed to transport mineral resources and expand their sales networks.

Ulaanbaatar's projects to construct power plants and energy transmission networks alone are estimated to be worth $2.7 billion.

The two countries also signed a pact under which South Korean will provide to Mongolia 170 buses, manufactured by South Korean firms, in the form of loans from the economic development cooperation fund, a state fund designed to support developing countries. 

In addition, the two sides signed an MOU over forestry cooperation to limit desertification in Mongolia and the spread of yellow dust from the Gobi Desert.

Other MOUs aim to bolster bilateral cooperation in mutual investment, new renewable energy, telemedicine, culture, agriculture, social welfare, health insurance, electronic administration, development of mineral resources and other areas. 

During Sunday's summit, the two leaders also agreed to work together to promote stability on the Korean Peninsula based on the "firm" position to achieve the denuclearization of North Korea.

"(During the summit), I once again expressed my appreciation to President Elbegdorj for his support (for Seoul's policy) against Pyongyang's nuclear development and the reunification of the two Koreas," she said during a joint press conference.

"From now on, we will closely cooperate with Mongolia in responding to various provocations (by the North), including its nuclear development, which is the biggest element of threat to regional stability," she added.

Elbegdorj noted that the two countries also agreed to cooperate at international institutions, such as the United Nations to pursue a nuclear-free Korean Peninsula and promote peace in the region. (Yonhap)