THE reception area of the Kuwait International Hotel has a new name: "the lobby of broken dreams."Hunched over coffee tables, huddled in corners, dealing out business cards by the pack, Westerners are everywhere, bidding for a slice of the reconstruction pie. But most of them are finding it harder and slower going than they had expected. Because nearly five months after coalition troops liberated this desert emirate, Kuwait is still in a daze. Traumatized by seven months of Iraqi occupation, shocked by the damage left in its wake, and critically short of people and equipment, the Kuwaiti government and people are still struggling to find their bearings. The essentials are back in place, however. Under the direction of the United States Army's Kuwait Emergency Reconstruction Office (KERO), contractors have been at work over the past four months restoring basic services, such as water and electricity, and repairing public buildings. "The physical environment is up and running now," says KERO chief, Col. Ralph Locurcio, despite myriad gremlins such as four-way green lights. The roads are cleared of destroyed vehicles; electricity and water supplies are reliable; the telephones are working - more or less; the airport is open; and KERO contractors are repairing schools. Though thousands of homes, shops, and offices have still to be repaired after the vandalism they suffered at Iraqi hands, streets have been cleared of mountains of trash, some shops have reopened, and signs of normal life are sprouting here and there. "All Amiga users who still got their Amigas, call or write...." reads one bill posted on the wall of a busy shopping mall to attract Amiga computer users, "to supply them with all the latest stuff." But the country is nowhere near recovering from the occupation, Kuwaitis and foreign residents say. In government offices, estimates Colonel Locurcio, no more than 20 percent of employees are showing up for work despite a government request that everyone report on June 1. And in the private sector, few businessmen have even begun to set up their enterprises again as they wait to see what sort of assistance the government might offer them. "The country is still on holiday," says one Western diplomat. "A lot of people came back, took one look at their home, hired someone to fix it, and went abroad again." Many of those who endured the occupation inside Kuwait have left the country for a change of scene, and perhaps as many as half of the 650,000 people of Kuwait are still abroad, diplomats estimate. Some Kuwaitis, although acknowledging that summer is the traditional vacation period, are disappointed by their compatriots' behavior. "We have finished with the war, now is the time to build our country, not to go on holiday," says one Army officer. While most Kuwaitis are expected to return by September, when the school year starts, the country is stalled also by the absence of hundreds of thousands of foreign laborers who kept Kuwait going before the Iraqi invasion and who fled last August. The workers have begun to trickle back, mainly from Bangladesh, the Philippines, Thailand, and Egypt, but only under close scrutiny by the Kuwaiti authorities, who have decided that in the future they want only a fraction of the 1.5 million foreigners who worked for them in the past. "You have a two-part problem," explains Locurcio. "You want to rebuild fast so you want to open up fast and let everyone in. But the Kuwaitis are really leery about whom they are going to let in. It's very hard to coordinate all that." Even if the workers were returning freely, in many cases they would have nothing to do because of lack of equipment. The Iraqis stole everything from office furniture and city buses to industrial machinery and trashed much of what they left behind. "The recovery is taking longer than expected, but is it taking longer than it should?" wonders one European diplomat. "There has never been an invasion that deliberately destroyed so much infrastructure." In the public sector, ministries and state enterprises have been slow to start replacing that infrastructure because they still do not have a budget. Normally announced on July 1, the budget this year has been delayed, and officials say they do not know when it will be finally drawn up. "Until ministries know how much money they have to spend, nothing is going to happen," the diplomat predicts. Private businessmen, meanwhile, starved of the credit they need to rebuild their companies, are waiting to see how government policy develops before committing to new investment. But many doubt whether the government, still fighting to reestablish itself, is capable of quickly encouraging businessmen to start work again. "There is a lack of confidence in the regime's ability to administer the economy," says opposition leader Abdullah Nibari. "The general trend is for people who can keep their money outside to do so." "The real problem," says the European diplomat, "is that the pre-invasion Kuwaiti government machinery was designed to service a welfare state that ticked over nicely on oil revenues. It was not designed to kick-start an economy that has stalled."