Phoenix have reacted sharply to the Blackburn Rovers captain's statement.
"That just staggers me. Some of the things I've been hearing have been horrendous," Nelsen told The Press.
Phoenix chief executive Tony Pignata said Nelsen's comments were both ill-informed and disappointing.
"How can he say we are not developing football in New Zealand when we have got nine All Whites playing for the Phoenix?" he said.
"When was the last time he played for the All Whites? It was 2004, when they lost to Vanuatu.
"It's just disappointing. Ryan is an icon for the game, given his stature in the Premier League, but instead of helping the game he slams it.
"Our responsibility is to (owner) Terry (Serepisos) who puts in five million dollars a year to run this club and to the Phoenix to make the playoffs and we are going to pick a squad we believe can do that.
"We are 12 months old so you can't say things like that when we are trying to establish the foundations of a club. I'm sure Blackburn don't worry about developing players for Fabio Capello and the English national team. Their main role is to win games, make Europe and win the championship. I think Ryan should concentrate on playing and leave the development needs to New Zealand Football.
"The other thing that disturbs me is his comment about the Phoenix not releasing players. Well, Tony Lochhead and Shane Smeltz were fourth and fifth in line. It was made quite clearly to us they wanted Ryan, Chris Killen and Simon Elliott.
"If we were given the same option and leeway that Ryan had, then we would have released Tony and Shane for 10 days. But we were told they had to go for five weeks and that they would miss pre-season."