Abstarct: In economies in transition such as Iraq, whose production structure is heavily influenced by oil revenues and global energy market fluctuations, the way investment allocation and planning plays a key role in improving the performance of real sectors of the economy. In Iraq, despite a significant increase in investment spending after 2003, the correlation between investment growth and real GDP growth has sremained low. This is rooted in the structural weakness of the Iraqi economy, its heavy dependence on oil revenues, the lack of transparent resource allocation policies, and the weakness of the financial planning and supervision system. The manufacturing sector, as the main engine of sustainable growth, is one of the most important areas affected by the inefficiency of investment planning. The labor and capital productivity index in this sector has been on a downward trend. The main problem of the Iraqi economy is not a lack of investment, but rather a weakness in the planning and efficiency of investment allocation. The lack of economic evaluation of projects, the lack of coordination between financial and industrial policies, the lack of transparent performance indicators, and the heavy dependence of the capital budget on oil revenues have prevented investments from leading to sustainable growth and increased production output. From a legal perspective, the legal frxamework governing investment planning in Iraq is one of the key variables in the efficiency of resource allocation and the achievement of development goals. Over the past two decades, Iraq’s legal and institutional system has faced challenges such as regulatory instability, weak implementation of investment laws, and lack of coordination between legislative institutions and development policy implementers. Despite the adoption of the “Investment Law No. 13 of 2006” and its subsequent amendments, which were designed to attract domestic and foreign investment and facilitate licensing processes, a large part of its objectives have not been achieved due to weak effective implementation and institutional oversight. The implementation of investment-related laws is often faced with institutional conflicts, bureaucratic bureaucracy, and overlapping jurisdictions between ministries and local governments. From the perspective of the conceptual model of the present study, investment-related laws and institutional frxameworks are considered as contextual or moderating variables that can strengthen or weaken the relationship between “investment planning” and “productive sector output”. Otherwise, simply increasing capital expenditures without allocative and monitoring efficiency will exacerbate resource waste and increase regional inequality.