Ahn Cheol-Soo, an independent presidential candidate pictured here on November 21, 2012 in Seoul, South Korea.

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Ahn Cheol-soo had been working with Moon Jae-in to merge their bids

"From now on, Moon Jae-in is the single liberal candidate," Ahn says

Moon will face governing party candidate Park Geun-hye next month

Seoul, South Korea CNN  — 

South Korean presidential candidate Ahn Cheol-soo announced Friday that he is dropping out of the race, clearing the way for fellow left-leaning hopeful Moon Jae-in to face Park Geun-hye, the candidate for the governing Saenuri Party.

Ahn had been working with Moon, of the Democratic United Party, to merge their presidential bids ahead of next month’s election, but the two had failed to reach an agreement.

Read more: South Korea’s ruling party taps Park for presidential bid

“I am giving up my presidential candidacy,” South Korean news agency Yonhap quoted Ahn as saying. “From now on, Moon Jae-in is the single liberal candidate.”

The race will determine who will lead South Korea, a key U.S. ally in Asia, for the next five years amid long-running tensions with the unpredictable, nuclear-armed North.

The current South Korean president, Lee Myung-bak of the Saenuri Party, is prevented by the constitution from running for another term.

Both Park and Moon are expected to pursue a more conciliatory line toward North Korea than Lee, who took an uncompromising approach to dealings with Pyongyang.

Read more: South Korean military embarrassed after defector from North knocks on door

Popular among conservative voters, Park has said she aims to focus on welfare policies. If elected, she would become the country’s first-ever female president.

She is a daughter of former president Park Chung-hee, who stirs mixed feelings among South Koreans. Some claim he was a dictator who stifled opposition; others credit him with overseeing a key phase of South Korea’s economic development. He was shot and killed by his intelligence chief in 1979.

Ahn, who founded an anti-virus software company, had gained popularity for his criticism of the large South Korean conglomerates, known as “chaebols.” He has argued that the nation’s economy is dominated by a few rich individuals.

He is a professor at South Korea’s prestigious Seoul National University and a former medical doctor.

Moon, a close ally of late president Roh Moo-hyun, is a former human-rights lawyer who was jailed in the 1970s by Park’s father.

CNN’s KJ Kwon contributed to this report.