With the collapse communism in Eastern Europe, attention has focused on whether such nation can successfully transform into entrepreneurial economies. Bosnia and Herzegovina is one of the post-communist countries where the transition from a planned economy to a market-based economy has been more complex than in other countries in SEE. The development of SMEs and Entrepreneurship in BiH is in its initial stage, even though this sector of economy could become the initial force of development of the country. The government still has no strategy for the development of Entrepreneurship and SMEs, and furthermore there are government imposed barriers obstructing the development of SMEs and Entrepreneurship. The significance of this research is underlined by the need for a selection of decisions on: - essential elements of Entrepreneurial environment in Western Balkans Countries - identification of main obstacles for the development of SMEs in these countries, - analysis of institutional support for the development of SMEs and Entrepreneurship in BiH and other Countries of Western Balkans.