Japan and Mongolia say they are enhancing economic cooperation, in part to develop mineral resources in Mongolia. The agreement came during a visit by Mongolia's prime minister to the Japanese capital.

Mongolia Prime Minister Mieagombo Enkhbold

Mongolian Prime Minister Mieagombo Enkhbold, who took office earlier this year, says he is making it a priority to rapidly develop the country's mineral resources - but not at the expense of damaging the environment.

Mr. Enkhbold says that gold mining has increased significantly over the past year and Mongolia wants to use modern technology to extract resources in an environmentally sound way to enhance economic development.

About one-third of Mongolia's two million people live in poverty, but the country is believed to have vast mineral deposits.

The mineral sector accounts for almost 20 percent of Mongolia's gross domestic product - nearly double the percentage of four years ago.

During the prime minister's five-day visit to Japan, which began Sunday, the Japanese government extended Mongolia its first loans in five years. The loans, worth about $25 million, are intended to develop smaller enterprises and protect Mongolia's environment.

Japan had suspended yen loans to Mongolia in 2001 until Mongolia took care of old debts owed to Russia. That was done three years ago.

Mr. Enkhbold told reporters in Tokyo Wednesday that upgrading its relationship with Japan is now a top foreign policy priority for Mongolia.

Mongolia also enjoys close relations with the United States. It has more than 100 troops in Iraq on a peacekeeping mission and is working to establish a regional center for peacekeeping training.

Mongolia is sandwiched between Russia and China, but Mr. Enkhbold says he does not believe that its efforts with the United States to fight terrorism will harm its ties with them.

The Mongolian prime minister says the partnership with Washington does not mean any changes in its relationship with its two powerful neighbors and those good relations will continue in the future.

Although Russia, as a former ally from the communist era, still has substantial political and economic clout in Ulaanbaator, China has emerged as Mongolia's primary political and economic partner in recent years. But many Mongolians remain wary, fearing that China's influence and ambitions could overwhelm Mongolia's economy and culture.

During his stay here, Mr. Enkhbold reached an agreement with Japanese Prime Minister Junichiro Koizumi calling for six-party talks to resolve the issue of North Korea's nuclear development program diplomatically.

Mongolia is not a party to those talks, which involve North and South Korea, China, the United States, Japan and Russia. But Mongolia has close ties with North Korea and has quietly encouraged the Stalinist state to emulate it in making the transition from a communist economy to a capitalist system.