By David Morgan

WASHINGTON, Oct 30 (Reuters) - Iraq's electricity output has reached a new high but the country's reconstruction effort lags in most areas including oil production, manufacturing and basic services, a U.S. report said on Tuesday.

The report by the Special Inspector General for Iraq Reconstruction said total relief and reconstruction investment has reached $103.9 billion -- with about $45 billion from the United States -- through the third quarter of 2007 as violence declined with the U.S. troop buildup in and around Baghdad.

The report to Congress also criticized U.S. involvement in Iraq's development for lacking a central plan for helping to deliver essential services, manage programs or implement budgets.

Iraq's unemployment was running as high as 40 percent and the government's inability to craft an oil law to distribute wealth from the world's third-largest oil reserves was dampening prospects for economic improvement, it said.

The report cited improvements in Iraq's electricity sector, where power output set a postwar record of 4,550 megawatts per day because of additional generation units, a drop in attacks on infrastructure, and improvements in operations.

But power production, which surpassed prewar levels by about 500 megawatts, still met only 60 percent of national demand and remained well below a 6,000-megawatt production goal set in 2003 by the former U.S.-led Coalition Provisional Authority, the report said.

The quarterly report, coming more than six weeks after a Bush administration progress report on security and political progress, showed stubborn challenges remaining for Iraq from infrastructure to water, health and basic services.

Oil output, which accounts for 65 percent of Iraq's gross domestic product, remained below the prewar average of 2.58 million barrels a day, averaging 2.16 million barrels of crude a day.

Refining production for gasoline and diesel continued to decline, dropping to 36 percent and 28 percent below prewar levels respectively, as a result of aging equipment, theft, maintenance shortfalls and shortages of spare parts, manpower and electricity, the report said.

A U.S.-funded program to boost Iraq's manufacturing sector has restarted 17 factories with about 5,000 total employees, the report said.

But it said the current state of the manufacturing sector -- 175 factories running at production levels of 10 percent to 30 percent -- remains far behind the 240 prewar factories that operated at 70-80 percent of capacity.

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