ASIA : Kobe: From Nightmares to Dreams : Five months after the quake, the rebuilding process is well on its way. Planners hope to sculpt a new city, unfettered by the confines of the past.

From a panoramic view on the 16th floor of Kobe City Hall, this western port city devastated by a terrifying tremor five months ago today appears well on the road to repair.

To the south, giant orange cranes are back in operation at Kobe’s world-famous port, lifting cargo containers onto ships from around the world. With port traffic back up to 40% of pre-quake levels and total recovery expected by the end of next year, renovation is moving along at about the clip originally projected.

To the north, trains again speed in and out of New Kobe station. As of this month, all Japan Rail lines have been restored, along with most links on two private railways. The Hanshin highway, however, memorialized as a symbol of Kobe’s destruction as it lay on its side like a broken toy, is still two years away from recovery.

The city’s most prominent eyesores--banks and other major buildings toppled by Japan’s worst quake in 70 years--have been torn down and hauled away. Overall, nearly half of the 74,000 destroyed buildings have been demolished.

Temporary housing construction proceeds apace; officials expect all remaining shelter evacuees to be relocated by July. Already the number of evacuees has dropped from a peak of 232,403 in 601 shelters in January to 24,920 in 327 places today.

“From the Northridge earthquake, we learned that if you can’t recover your city’s facilities within one year, the town will have difficulties developing,” city spokesman Seiichi Sakurai says. “So we’re trying to recover as fast as we can.”

Mitsuo Monguchi is the 48-year-old supervisor of the Shinko High School shelter. His apparel company was destroyed in the quake. So was his home. The cramped temporary housing shelters won’t comfortably fit his family of five; he has failed to win a space in one, anyway.

“I can’t build a future outlook,” he says glumly.

But in the same shelter on a different floor, a retired couple cheerfully discuss their options with Yoshiko Sato, a volunteer. Maybe they’ll move to Australia, open a laundermat or start an herb garden, they say.

“It’s nice you have so many dreams,” Sato says.

“A dream doesn’t cost any money,” the man replies, beaming.

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Kobe is dreaming too: of using the horrific quake as a chance to sculpt a new city liberated from the confines of its earlier status quo. Urban planners dream of erecting the world’s most earthquake-proof city, with wider roads, more parks and tougher building standards.

Economic planners dream of hastening the city’s shift from heavy industry--represented by such local giants as Kobe Steel--to conventions, tourism, information technology and other services. They are floating ideas to establish a partially tax-free trade zone in the area. The legions of volunteers who have emerged from the disaster dream of sparking a new order of power-sharing with bureaucrats.

But as Kobe fades from the national spotlight, ousted by the more recent subway gas attack and the ongoing auto trade dispute with the United States, some here worry that the city may be left in the lurch.

Sakurai, the city spokesman, says he is particularly worried about whether the central government will provide enough aid to kick-start the local economy, still staggering from tremendous losses.

Unemployment has nearly tripled, from 10,000 people before the quake to 27,000 after, he says, adding that the issue could spiral into a major social problem if left unchecked.

And traditional practices, such as the system of interlocking business groups known as keiretsu , have made small Kobe firms especially vulnerable because many have relied on work from one major contractor. Many now lack the wherewithal to scrabble up new business from diverse sources, he said.

“This is probably the first case among developed countries of damage to this extent,” Sakurai says. “So Japan’s quality as a country is at issue. The question is whether the Japanese government can help Kobe recover or not.”