News Corp. chairman Rupert Murdoch on Tuesday called for the Arab states of the Gulf to end censorship, reduce regulation and open their media markets to competition.

Giving a keynote speech at the Abu Dhabi Media Summit — with global media leaders in the audience who included AOL’s chairman-CEO Tim Armstrong, Google’s chairman-CEO Eric Schmidt and James Murdoch, head of News Corp. outside the U.S. — Murdoch said a thriving media industry could help the oil-rich Arab city state diversify its economy.

Opened by Sheikh Mohammed Khalaf Al-Mazrouei, the chairman of the government-owned Abu Dhabi Media Co., Murdoch told the summit that although national and traditional values demanded respect, lighter-touch regulation would do more good in the long run.

“Creative talents remain constrained by arbitrary boundaries. To make this talent bloom, you need businesses willing to invest in creativity, to nurture talent and to build audiences that will buy and enjoy the fruits of this enterprise,” Murdoch told 550 delegates at the inaugural summit, designed to be the media industry equivalent of the World Economic Forum in Davos, Switzerland.

Speaking at a luxury five-star hotel, Murdoch acknowledged the challenges of living with free media markets.

“This city is the capital of one of the Middle East’s most cosmopolitan societies. Your people have one of the highest GDPs per capita in the world. And every day you continue to grow — in size, in sophistication, in wealth, and in the attention of the global press.

“With this increased global attention comes the occasional inconvenient or unwelcome story. … Throughout my life, I have endured my share of blistering newspaper attacks … unflattering television coverage … and books that grossly distort my views or my businesses or both,” Murdoch continued.

“I have learned that this kind of coverage is a fact of life in a modern media society. I have learned too that it is the price one pays for success. For a nation, the stakes are even higher. In face of an inconvenient story, it can be tempting to resort to censorship or civil or criminal laws to try to bury it. This is not only a problem here: In France a criminal defamation law remains in place. In the long run, this is counterproductive.

“Markets that distort their media end up promoting the very panic and distrust that they had hoped to control.

“Greater openness must not only apply to editorial freedoms — cozy relationships between media outlets and advertisers also lead to constricted markets.

“Opaque markets tend to be unfairly dominated by one or two players. This can be a cozy arrangement for those players. But a nation pays a very high price for this cozy arrangement — because it takes away the financial engine needed to drive investment in local content.”

Murdoch underlined his remarks by reference to his own media investments in the Gulf countries — a region with a population of 335 million.

News Corp. has invested in Rotana, the world’s largest producer of Arab music, is establishing production offices in Abu Dhabi and Monday announced a strategic partnership between Fox Intl. Channels and Abu Dhabi’s twofour54.

Looking to the future for Abu Dhabi, which, unlike its less wealthy neighbor Dubai, is oil-rich and keen to diversify, Murdoch spoke of the value of creative industries.

“While oil is undeniably vital to our world, the untapped creativity in this region represents a resource infinitely more precious. … Creativity is a resource that excites the imagination … expands jobs and opportunity … and improves our quality of life. It is clean and it is high-value. Most of all, because it is rooted in the human mind, creativity is the one economic resource that is truly inexhaustible.

“Your people are eager, talented and young. They have aspirations in common with their peers in other parts of the world — yet they hold fast to the traditions that make them unique. Give them a society that rewards creativity.”