This literature review, while not comprehensive, is aimed at informing the Strengthening Local Education Capacity project under way in Indonesia. Strategies that strengthen educational capacities at the school and local levels were reviewed, followed by strategies for local governance. Two school governance models, public choice and public service, were reviewed. The public-choice model proposes moving closer to a private-market solution by allowing parents greater school choice through privatization and voucher systems. Other countries' practical experience with this model already indicates deleterious consequences for equity and access. The public-service model aims to change methods of providing services through collectivist and consumerist strategies. Local governance encompasses two dimensions (political and legal) influencing local elites' delivery of educational services. In a decentralized system, the local level will increasingly be required to provide the linkage between the local and central levels. Three local-governance strategies are reviewed: local institutional development, promoted by large donor agencies, especially USAID; the learning-process approach, based on five successful Asian decentralization experiences; and third sector collaboration, recognizing the importance of commitment and support from voluntary organizations. (Includes an executive summary and a topically organized listing of 128 references.) (MLH)