UPDATE 1-Murdoch urges more transparency in Arab media

* Murdoch calls for lighter regulation, more competition

* Says censorship counter-productive

* Says aim of Rotana stake buy is to produce Arab content

(Adds comments on Rotana, e-readers; background)

By Georgina Prodhan

ABU DHABI, March 9 (Reuters) - Rupert Murdoch urged Arab governments on Tuesday to reject media censorship and open their markets to foreign competition as he opened a high-profile conference aimed at furthering oil-rich Abu Dhabi's ambitions as a cultural hub.

The chief executive of News Corp (NWSA.O), one of the biggest foreign investors in the region's media, called for lighter regulation and said economic incentives were more effective than protectionism.

"In the face of an inconvenient story it can be tempting to resort to censorship or civil or criminal laws to try to bury it," he said in the opening keynote speech at the Abu Dhabi Media Summit.

"Markets that distort their media end up promoting the very panic and distrust that they had hoped to control," he said.

In November the Times, a News Corp newspaper, was removed from newstands across the United Arab Emirates for a few days after it published a double-page spread showing a graphic of Dubai's ruler sinking under a sea of debt.

Earlier that month a lack of transparency about the scale of Dubai's debt problems had increased panic in markets around the world after government conglomerate Dubai World requested a standstill of repayments for $26 billion in debt.

Dubai and Abu Dhabi, both part of the United Arab Emirates, have created free zones for media and other industries which allow foreign companies to repatriate all of their profits and to operate without a local partner.

The UAE is also revising its media law but the latest draft still calls for fines of up to 5 million UAE dirhams ($1.36 million) for criticising the head of state or rulers, publishing misleading news that could harm the economy, or material insulting the traditions and values of the UAE.

MORE THAN TALK

Murdoch told his audience, including royalty and media executives, of News Corp's large investments in the region -- in contrast to rivals who have been put off by piracy, censorship and lack of audience metrics despite a high growth potential.

"I'm sure there's no shortage of experts who fly in here and give you nice words," he said. "For our company, this is more than talk. We've been here for some time. And we are expanding our presence at a moment when others are paring back."

News Corp last month agreed to buy 9 percent of Saudi-based media group Rotana for $70 million with an option to double that stake, and on Monday said it would move some of its Fox International Channels operations to Abu Dhabi.

Murdoch said on Tuesday the ultimate aim of the Rotana partnership was to produce original Arab content for markets both in the region and abroad.

According to Thomson Reuters data just three deals were done last year that involved foreign companies buying Middle Eastern media assets, worth a total of $44.2 million, just 0.5 percent of the $7.9 billion of media deals done globally.

Murdoch also appealed to the vanity of his Abu Dhabi hosts, who are grabbing the spotlight while flashier neighbour Dubai struggles to resolve its debt crisis.

The conference is being held in a space-age hotel overlooking the Yas Marina Formula One motor racing circuit.

"I wish to emphasise the incentives that will help money flow to those who invest in creativity," he said. "With these incentives in place, you will build a creative sector worthy of the great capital you have planned."

He also seized the opportunity to push his message about the value of content versus the means of distributing it.

News Corp's Fox recently resolved a lengthy dispute with Time Warner Cable (TWC.N) about how much the cable-service provider should pay for the right to carry the network.

Murdoch has also said that Amazon's (AMZN.O) book pricing for e-reader devices like the Kindle devalued the publishing industry.

"The bright and shiny wonders that technology gives us can be like the desert sun -- they can blind us to what is real and valuable," he said. "Without creative content, these electronic devices are merely expensive playthings." ($1=3.673 UAE dirhams) (Reporting by Georgina Prodhan; Editing by Karen Foster, Greg Mahlich)