INTRODUCTION AND CONTEXTFew people could have imagined, even in 1990, the radically different circumstances that would face the world community at the turn of the century; particularly those in the developing world as well as those in richer countries engaged in the development enterprise. Against the promise of a peace dividend at the end of the Cold War, there have been global financial crises, massive crimes against humanity, episodes of genocide and brutal civil conflict, and a devastating pandemic (HIV/AIDS) that has hollowed out much of the working population in Africa and elsewhere. There have been recurring droughts and famine, due both to climate change and to human folly or malevolence. Most recently, the US-led wars against terrorism in Afghanistan and Iraq portend a massive reallocation of world resources to security and defence.At the same time, regions of prosperity and greater well-being have surfaced in the developing world, most recently in the two Asian giants, China and India, home to 40 per cent of humankind. Industrial development, powered by modern technology and international commerce, is transforming many parts of Asia and Latin America, providing people with employment and income opportunities their parents only dreamed about. In Africa, the New Partnership for African Development (NEPAD) and the formation of the African Union signal a new mood among African leaders to grapple collectively with the issues of development, governance and conflict.In this rapidly changing environment, Canada's role is bound to be different from the one it enjoyed until 1990. It is also true, however, that during the decade of the 1990s, Canada deliberately chose to scale down its role and commitments on the world stage because of its fiscal crisis. Canada was not unique, however, in facing a fiscal crisis, though it arguably took more severe measures than many of its peers in the industrial world, particularly the Nordic countries and the Netherlands, which sustained their high levels of support for foreign aid despite similar fiscal pressures. Moreover, Canada's aid program took a disproportionate share of the cuts in federal funding as part of its deficit-reduction initiatives.(1)By the end of the decade, the fiscal deficit was clearly vanquished and many Canadians called upon their country to recover some of the ground it had ceded.(2) It is not possible, though, to regain the status quo ante because the world is a very different place, and Canada's new prime minister must make choices that are attuned to it and to its likely future course.Our paper is organized as follows. This section describes the key elements of the new context in which development must take place in the years ahead. The following section sets out the key challenges and opportunities that face leaders, including Canada's new prime minister, as they contemplate the reshaping of development policy. The final section sets out an agenda for the new prime minister in the new context, taking advantage of Canada's key strengths.There are two aspects of the current global context particularly worth noting. First, the picture is not all bad. Arguably, an overall assessment might be that the developing world is a better place today for most of its people than it was half a century ago. Second, the relations between rich and poor countries are considerably more complex. The ubiquitous forces of globalization have made developing countries part of a system in which foreign aid is increasingly insignificant relative to other linkages with the industrial world--trade, finance, migration and technology. As a result, thinking about development, and about development policy, has shifted substantially in recent years.Good as well as badOver the last decade, a considerable amount of bad news has emanated from the developing world, disseminated by the media, ever more able to transmit instantaneously and in graphic detail, accounts of tragedies from the remotest corners of the globe. …